FORM
6-K
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Report
of Foreign Issuer
Pursuant
to Rule 13a-16 or 15d-16
of
the Securities Exchange Act of 1934
For the
month of June 2010
Commission
File Number: 1-33659
COSAN
LIMITED
(Translation
of registrant’s name into English)
Av.
Juscelino Kubitschek, 1726 – 6th
floor
São
Paulo, SP 04543-000 Brazil
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F:
|
Form
20-F
|
X
|
Form
40-F
|
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(1):
|
Yes
|
No
|
X
|
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(7):
|
Yes
|
No
|
X
|
Indicate
by check mark whether by furnishing the information contained in this Form, the
Registrant is also thereby furnishing the information to the Commission pursuant
to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
|
Yes
|
No
|
X
|
If “Yes”
is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): N/A
COSAN
LIMITED
|
Item
|
|
|
1.
|
Communication
regarding 4th Quarter Fiscal Year 2010 earnings
release
|
Net income of R$986.5 millions in
FY’10
São Paulo, June 10, 2010 - COSAN LIMITED (NYSE: CZZ; Bovespa:
CZLT11) and COSAN S.A. INDÚSTRIA E COMÉRCIO (Bovespa: CSAN3) disclose today
their results referring to Fiscal Year 2010 (FY’10), ended in March 31, 2010.
The results presented below are consolidated in accordance with Brazilian
accounting policies.
|
Marcelo
Martins,
CFO & IRO
Luiz Felipe
Jansen de Mello,
Head of IR
Investors@cosan.com.br
www.cosan.com.br
|
Highlights FY’10 | |
|
●
Record Net Revenue of R$15.3
billions, up 144.6% than Fiscal Year
2009
● Record
EBITDA of R$1.7
billion
● Net
Income of R$986.5 millions
● Crushed cane volume in 2009/10
crop totaled 50 million tonnes, compared to 43 million tonnes of 2008/09
crop
|
||
 |
||
 |
Summary of Financial and Operating
Information (R$MM)
|
||||||||||||||
|
4Q'09
|
4Q'10
|
FY'09
|
FY'10
|
||||||||||||
|
2,349.8
|
4,394.1 |
Net
sales
|
6,270.1 | 15,336.1 | |||||||||||
|
239.9
|
773.9 |
l Gross
profit
|
799.4 | 2,125.4 | |||||||||||
|
10.2
|
%
|
17.6 | % |
Gross
Margin
|
12.7 | % | 13.9 | % | |||||||
|
Definitions:
FY’10 - fiscal year
started on April 1st,
2009, and ending on March 31st,
2010
FY’09 - fiscal year
started on May 1st,
2008 and ending on March 31st,
2009
4Q’10 - quarter ended on
March 31
st, 2010
|
(99.5
|
)
|
396.5 |
l Operating income
(loss)
|
(709.1 | ) | 1,412.9 | ||||||||
|
-4.2
|
%
|
9.0 | % |
Operating
margin
|
-11.3 | % | 9.2 | % | |||||||
|
165.9
|
575.9 |
l
EBITDA
|
718.0 | 1,733.1 | |||||||||||
|
7.1
|
%
|
13.1 | % |
EBITDA
Margin
|
11.5 | % | 11.3 | % | |||||||
|
40.4
|
744.7 |
l
EBITDAH
|
765.7 | 2,064.0 | |||||||||||
|
1.8
|
%
|
16.3 | % |
EBITDAH
Margin
|
12.1 | % | 13.2 | % | |||||||
|
(39.9
|
)
|
309.6 |
l Income (loss)
before minority interest
|
(474.4 | ) | 979.0 | |||||||||
|
(40.2
|
)
|
308.7 |
l Net income
(loss)
|
(473.8 | ) | 986.5 | |||||||||
|
-1.7
|
% | 7.0 | % |
Profit
(loss) Margin
|
-7.6 | % | 6.4 | % | |||||||
|
334.6
|
745.4 |
Capex
|
1,346.1 | 1,926.1 | |||||||||||
|
3,035.6
|
4,255.4
|
Net
Debt
|
3,035.6 | 4,255.4 | |||||||||||
|
3,396.6
|
5,157.6
|
Shareholders'
& Minorities Equity
|
3,396.6
|
5,157.6
|
|||||||||||
1 of
31
A. Market Overview
According to UNICA, the sugarcane growers’ association, crushed cane volume in Brazil’s central-south region totaled 541.9 million tonnes in the 2009/10 crop, 7.3% up compared to the previous
harvest. Sugar production increased by
7.3% to reach 28.6 million tonnes, while ethanol output dropped by
5.6% to 23.7 billion liters, of which hydrous ethanol accounted for 17.5 billion liters and anhydrous ethanol
for 6.2 billion liters, an increase of 3.8% and decrease of 24.8%, respectively, in relation to the previous
harvest. This reflects the crop shortfall due to
record level of rains during the crop, when the weather is usually
dry, which not only decreased the number of
crushing days but also the sucrose content of the total sugar recoverable
(TSR) in the cane to 130.25 kg/t, compared to 140.88 kg/t in the previous harvest. In addition, due to increase in sugar prices in the
international market during the crop, the production mix continued to
prioritize sugar (42.6%) compared to the previous
year.
UNICA estimates that the total crushed
cane volume for the 2010/11 crop will reach 595.9 million tonnes in Brazilian Central-South region, which, combined with an improve of TSR to
138.59 kg/t and 43.29% of cane towards sugar
production, maintaining the production mix more
focused on sugar compared to last year’s, will result in 34.1 million tonnes of sugar, 20.1 billion liters of hydrous ethanol and
7.3 billion liters of anhydrous
ethanol, an increase of 19.1%, 15.4% and 16.2%, respectively. These projections are mainly the result
of (i) greater agricultural productivity
(tonnes of cane / hectare) due to the higher level of rains during the
planting and growth of sugarcane, despite such adverse effects as the
orange rust of sugarcane,
which may affect certain
cane varieties and the aging of the field; (ii) higher yield of sucrose (TSR) in the cane as a result of a more favorable weather
conditions for harvesting and maturing of the cane, despite the higher volume of cane left
on the field, anticipation of the beginning of harvest
and the evolution of mechanical harvesting; and the (iii) increase in crushing capacity as result of the startup
of 10 new mill units and ramp-up of the harvesting area of those that
started operating in the previous harvests, effect that started to vanish due to the
lower investment level compared to the peak in 2007 and 2008 in the sector.
The latest UNICA data indicate an
increase of crushed cane volume in beginning of 2010/11 crop, until May 16th, totaling 93.9 million tones, 27.1% higher on the same period in the last
crop, mainly due to the advance of sugarcane
harvest. The production mix in the period continues to prioritize
sugar to attend the contracts which could not be performed last year, being 41.9% of production directed to this product
and 58.1% for ethanol. Sugar production reached 4.4 million tonnes, an increase of 38.7% than last crop, while ethanol output stood at
3.8 billion liters, with 2.9 billion liters of hydrous ethanol and
829 million liters of anhydrous
ethanol, an increase of 11.5% and 74.6%, respectively.
In this quarter, raw sugar prices averaged 24.52 US¢/lb, 92.8% up over 4Q09 and 3.6% up over 3Q10. It is important to note the variation of
prices in the period:
after rallying in
January, when sugar price reached 29.9 US¢/lb, the highest in 29 years, prices dropped by 44.5% until the end of the quarter. The downward trend continued, reaching the lowest point of
13.67 US¢/lb in the beginning of May, 54.3% down from the peak in
January.
2 of
31
This can be explained by some factors:
(i) export of 500,000 tonnes of out-of-quota sugar to the European Union, as
mentioned in the last Financial Letter; (ii) export of nearly 1 million
tonnes of sugar from Brazil in the quarter, which was not expected by the market
based on the estimates of initial inventories for the harvest; (iii) the
recovery and extension of the Indian crop, which usually ends in March and was estimated between 13
and 15 million tonnes. In May, there were still several mills processing cane,
with new estimates between 18 and 19 million tonnes; (iv) the deferral of demand
in response to the higher prices; (v) the prospect of better weather conditions for the 2010/11
crop in Brazil and India, resulting in more optimistic sugar production
estimates ranging from 32-35 to 24-25 million tonnes,
respectively.
On the other hand, world sugar
inventories are much lower compared to historical levels and need to be recomposed.
Moreover, there are several uncertainties concerning the crop in some countries,
for example: (i) in Brazil and India, if the weather conditions are not as
adequate as expected, production will be lower than expected; (ii) the announcement by the Pakistani
government of its intention to buy approximately 900,000 tonnes; (iii) potential
imports from China to recompose strategic inventories, given that these were
released to curb inflation in the domestic market after a bad crop; (iv) the possibility that the
United States will allow additional raw sugar imports to meet domestic
demand.
International refined sugar prices
partially followed the downward trajectory of raw sugar prices, dropping by
37.6% in 61 days. The average price in the period was
US$659.15/t, 75.5% and 7.4% up over 4Q09 and 3Q10, respectively. Due to the lack
of sugar for refining, mainly because Brazil is in the inter-harvest period, the
white premium averaged US$118.58/t.
In 4Q10, the Brazilian real depreciated against the U.S. dollar to
average R$1.80/US$, 3.6% up from the previous quarter. In the quarter, the Real
reached R$1.87/US$, due to the initial signs of an economic slowdown in
Portugal, Italy, Greece and Spain. The foreign exchange rate at
the end of the period was R$1.78/US$,
compared with R$1.74/US$ in December 2009 and R$2.32/US$ in March
2009.
Domestic crystal sugar prices (ESALQ)
averaged R$70.80/50Kg bag (or 35.65 US¢/lb) in 4Q10, 22.8% up compared to the
previous quarter and 63.7% up on 4Q09. These prices reflect the lower
sugar availability due to the rainy season and strong exports during the
harvest, which amounted to 19.8 million tonnes (from April/09 to
March/10).
In response to the previously mentioned
factors and the macroeconomic conditions, major hedge funds, plus
smaller funds and speculators, who had built positions in the commodity due to its solid fundamentals, quickly reduced their long
sugar positions, helping with the decline in sugar prices. At the end of 4Q10, the net long
position stood at 158,000 lots, or 15.8% of open contracts, 30.2% down from the previous
quarter.
3 of
31
In the domestic market, the lower
availability of ethanol due to the accelerated demand in 2009 (increase in flex
fuel cars sales) and the reduced supply due to the rainy harvest, resulted in a
significant increase in prices of both anhydrous and hydrous ethanol.
Hydrous ethanol prices
(ESALQ) averaged R$1.041/liter in 4Q10, 40.8% up YoY and 9.7% up over 3Q10.
Anhydrous prices averaged R$1.188/liter, 43.1% higher than 3Q09 and 8.6% up on
the previous quarter.
According to Brazil’s National Petroleum
Agency (ANP), the average hydrous ethanol/gasoline price parity (weighted by the
size of the fleet) closed 69% at the end of 4Q10, returning to below 70% parity
in 6 states, which account for more than 50% of Brazil’s flex-fuel fleet.
Between February and May
1st, 2010, the anhydrous ethanol blend ratio in gasoline reduced from 25% to
20%, yet anhydrous ethanol consumption remained unchanged compared to February
and March 2009, once gasoline consumption increased significantly as ethanol
prices were above parity during most of the period.
According to ANFAVEA, the auto
manufacturers’ association, flex-fuel vehicle sales in Brazil totaled 652,700 units in 4Q10,
accounting for 87% of new car sales, 16.1% up year-on-year.
According to ANP, Diesel sales in the
first three months of 2010 totaled 11.1 billion liters, 12.7% up year-on-year.
Gasoline A volume increased
by a significant 29.7% in the period, with 5.9 billion liters sold, as ethanol
prices were above parity and percentage of anhydrous ethanol blended in gasoline
decreased. For these same reasons, ethanol consumption dropped by 24.7% in the
period to reach 2.8 billion liters.
4 of
31
B. Production
Figures
|
4Q'09
|
4Q'10
|
Production
Highlights
|
FY'09
|
FY'10
|
|||||||||
|
207
|
181 |
Sugarcane
Crushed (thd tons)*
|
42,594 | 50,314 | |||||||||
|
132
|
16 |
Own Cane (thd
tons)
|
21,537 | 23,459 | |||||||||
|
75
|
164 |
Suppliers
(thd tons)
|
21,057 | 26,855 | |||||||||
|
|
Production
|
- | |||||||||||
|
9
|
- |
Raw Sugar
(thd tons)
|
2,531 | 2,519 | |||||||||
|
-
|
- |
Refined Sugar
(thd tons)
|
656 | 994 | |||||||||
|
-
|
- |
Anhydrous
Ethanol (thd cbm)
|
734 | 623 | |||||||||
|
8
|
9 |
Hydrous
Ethanol (thd cbm)
|
936 | 1,211 | |||||||||
|
111.7
|
115.0 |
Sugarcane
TSR (thd cbm)
|
139.0 | 129.8 | |||||||||
|
61.7
|
%
|
99.5 | % |
Mechanization
(%)
|
50.8 | % | 64.5 | % | |||||
*
This total includes production data from NovAmerica only as from June/09, when
it started being consolidated into Cosan. Considering the full year of
NovAmerica production, Cosan would have crushed 53.1 million tons of
sugar-cane.
Cosan crushed 50.3 million tonnes of
sugarcane in FY’10, 18.1% increase compared to the
previous year despite the atypical rainfall which reduced the number of crushing
days, chiefly due to the
merger of NovAmérica in
June 2009. The harvest mechanization ratio closed the year at 64.5%, versus
50.8% in FY’09. From the total sugar-cane crushed in
FY’10, 53.4% was originated from third
parties suppliers.
Thanks to the excessive rainfall, total sugar recoverable
(TSR) fell by 6.6% to only 129.8kg/t. As a result, the Company produced 2.5
million tonnes of raw sugar, 1.0 million tonnes of refined sugar, 1.8 billion
liters of ethanol, 1.2 billion of which hydrous and 0.6 billion anhydrous, 29.4% up and 15.1% down on
the previous year, respectively.
It is important to say that the above
mentioned TSR is measured when the sugar-cane enters into ours mill while the
average TSR of the South-center presented by UNICA is measured through a stoichiometric conversion of the
products. Using the UNICA´s
criteria, COSAN´s TSR would
have been 136.58 kg / ton of cane.
5 of
31
C. Operating
Performance
When comparing FY’10 and FY’09 for analytical purposes, the
following differences should be taken into consideration:
|
(i)
|
Due to the change in closure of
FY’09 from April to March 31, 2009,
the two fiscal years in question were not comparable: FY’09 consisted of 11 months only,
from May 2008 to
March 2009, while FY’10 consisted of 12 months, from
April 2009 to March 2010;
|
|
(ii)
|
The criterion for presenting
depreciation in the results analysis and financial statements was altered.
In FY’10, depreciation was booked under
the cost of goods
sold (COGS) and operating expenses (SG&A), whereas in FY’09 it was booked under production
costs (the entry into production of goods and services rendered) and
operating expenses. It is worth noting that depreciation under operating
expenses suffered no change.
|
|
(iii)
|
The consolidation of CCL only
began in December 2008. Thus CCLs figures for 4Q’09 and FY’09 correspond to the periods
between February and March 2009 and December 2008 to March 2009,
respectively.
|
|
(iv)
|
Cosan sold the aviation fuel
distribution business
in June 2009. Consequently, the figures as from 2Q’10 no longer include this
business;
|
|
(v)
|
NovAmérica’s results were consolidated as of
June 2009, when the company was merged into Cosan
S.A.
|
EBITDA per Business
Unit
|
EBITDA (R$ MM) -
FY'10
|
CAA
|
Rumo
|
CCL
|
Total*
|
||||||||||||
|
Net
Revenues
|
5.380,1 | 158,2 | 10.145,1 | 15.336,1 | ||||||||||||
|
(-) Cost of
Product Sold / Services Rendered
|
(4.068,0 | ) | (115,5 | ) | (9.374,6 | ) | (13.210,7 | ) | ||||||||
|
(=)
Gross Profit
|
1.312,1 | 42,7 | 770,5 | 2.125,4 | ||||||||||||
|
Gross
Margin
|
24,4 | % | 27,0 | % | 7,6 | % | 13,9 | % | ||||||||
|
(-) Selling
Expenses
|
(464,5 | ) | - | (400,1 | ) | (864,6 | ) | |||||||||
|
(-) General
and Administrative Expenses
|
(386,3 | ) | (18,1 | ) | (92,7 | ) | (497,2 | ) | ||||||||
|
(-) Other
Operating Revenues
|
312,2 | 4,0 | 16,9 | 333,1 | ||||||||||||
|
(+)
Depreciation and Amortization
|
584,7 | 14,2 | 37,5 | 636,3 | ||||||||||||
|
(=)
EBITDA
|
1.358,3 | 42,8 | 332,0 | 1.733,1 | ||||||||||||
|
EBITDA
Margin
|
25,2 | % | 27,0 | % | 3,3 | % | 11,3 | % | ||||||||
|
(=)
EBITDAH
|
1.689,2 | 41,8 | 332,0 | 2.063,0 | ||||||||||||
|
EBITDAH
Margin
|
29,6 | % | 26,4 | % | 3,3 | % | 13,5 | % | ||||||||
| * Total excludes eliminations from consolidation effects | ||||||||||||||||
6 of
31
Net Revenue
|
4Q'09
|
4Q'10
|
Sales Composition
(R$MM)
|
FY'09
|
FY'10
|
|||||||||
|
2,349.8
|
4,394.1 |
Net
Operating Revenue
|
6,270.1 | 15,336.1 | |||||||||
|
853.7
|
1,850.2 |
CAA
|
3,129.6 | 5,380.1 | |||||||||
|
502.4
|
1,215.5 |
l Sugar Revenue -
CAA
|
1,805.1 | 3,377.8 | |||||||||
|
64.1
|
347.7 |
Local
|
233.8 | 1,062.3 | |||||||||
|
438.2
|
867.8 |
Export
|
1,571.3 | 2,315.5 | |||||||||
|
337.5
|
602.1 |
l Ethanol Revenue -
CAA
|
1,176.0 | 1,747.6 | |||||||||
|
257.8
|
549.7 |
Local
|
775.1 | 1,325.9 | |||||||||
|
79.8
|
52.4 |
Export
|
401.0 | 421.8 | |||||||||
|
3.6
|
5.7 |
l Energy
Cogeneration - CAA
|
15.1 | 92.4 | |||||||||
|
10.3
|
26.8 |
l Other Revenue -
CAA
|
133.4 | 162.2 | |||||||||
|
9.7
|
38.3 |
Rumo
|
53.9 | 158.2 | |||||||||
|
9.7
|
24.9 |
l
Loading
|
53.9 | 142.1 | |||||||||
|
-
|
13.4 |
l
Transportation
|
- | 16.1 | |||||||||
|
1,505.7
|
2,588.7 |
CCL
|
3,106.0 | 10,145.1 | |||||||||
|
1,393.7
|
2,401.6 |
l Fuels Revenue -
CCL
|
2,893.9 | 9,437.3 | |||||||||
|
106.3
|
170.4 |
Ethanol
|
220.6 | 757.0 | |||||||||
|
594.6
|
1,208.6 |
Gasoline
|
1,267.0 | 4,111.0 | |||||||||
|
588.1
|
999.3 |
Diesel
|
1,156.3 | 4,338.5 | |||||||||
|
104.7
|
23.3 |
Other
|
250.0 | 230.9 | |||||||||
|
98.2
|
168.9 |
l Lubes Revenue -
CCL
|
186.4 | 634.0 | |||||||||
|
13.8
|
18.1 |
l Other Revenue -
CCL
|
25.8 | 73.7 | |||||||||
|
(19.3
|
)
|
(83.0 | ) |
Eliminations
from Consolidation
|
(19.3 | ) | (347.4 | ) | |||||
Net revenue totaled R$15.3 billion in
FY’10, versus R$6.3 billion in the previous
year. CCL accounted for
most of this figure, contributing R$10.1 billion, or 66.2% of the total.
CAA’s revenue, which grew by 71.9% to R$5.4
billion, was fueled by the merger of NovAmérica, higher sugar prices and the
start-up of the co-generation projects.
Net Operating Revenue (R$
million)
7 of
31
Sugar Sales
- CAA
Sugar sales totaled R$3.4 billion, 87.1%
more than the previous
year. The main factors contributing to the R$ 1.6 billion increase
were:
|
Þ
|
Record international and domestic
prices, 28.9% and 54.4% above previous year which have contributed with
gains of approximately R$ 453.5 million and R$ 127.3 million,
respectively;
|
|
Þ
|
The higher sugar volume sold,
resulted in an additional revenues of R$640.5 million. This increase in
volume can be explained by: (i) NovAmerica consolidation; (ii) the higher
share of sugar in the product mix; (iii) the reduction in carryover
stocks; and
(iv) the distortion in the comparison
with the previous year, which had only 11
months.
|
Sugar
Volume (thousand tonnes) and Average
Unit Price (R$/tonne)
The sugar inventories in FY’10 were 49.0% lower compared to the
previous year, reflecting the commercial strategy adopted to capture
the higher prices over the last quarter.
Sugar Inventories
|
4Q'09
|
4Q'10
|
|
|
'000
ton
|
266.4
|
135.8
|
|
R$'MM
|
109.3
|
93.6
|
|
R$/ton
|
410
|
689
|
8 of
31
Ethanol
Sales –
CAA
Ethanol revenue totaled R$1.7 billion,
48.6%, or R$ 571.6 million, up on FY’09, mainly due to:
|
Þ
|
Gain of R$513.2 million from
higher ethanol sales, thanks to: (i) the incorporation of
NovAmérica’s plants; (ii) the reduction in
carryover stocks, taking advantage of the higher inter-harvest
prices; (iii) the effect from the comparison with FY’09, which had only 11
months;
|
|
Þ
|
Gain of R$40.7 million due to the
increase in domestic average prices, notwithstanding the 18.3% decrease in
the international average prices;
|
|
Þ
|
Loss of R$78.0 million, due to
higher exports, whose average prices were lower than domestic
ones.
|
Ethanol
Volume (million liters) and Average Unit
Price (R$/thousand liters)
Ethanol inventories were 76.2% lower
than in the previous year
due to our strategy to capture the higher prices over the off-season period
(4T’10).
Ethanol
Inventories
|
4Q'09
|
4Q'10
|
|
|
'000
cbm
|
287.2
|
68.2
|
|
R$'MM
|
201.0
|
56.2
|
|
R$/cbm
|
700
|
824
|
9 of
31
Energy
co-generation
–
CAA
|
Þ
|
Energy revenue totaled R$92.4
million, thanks to growing investments in co-generation, which are
expected to continue recording strong growth in the coming years.
FY’10 was marked by the beginning of
energy delivered by Serra, Gasa, Costa Pinto, Tarumã and Maracaí accordingly to the bi-lateral
sales contracts and/or auctioned energy sale contracts. Sales volume
totaled 596MWh, at an average of
R$142/MWh.
|
Energy Sales
Volume (thousand MWh) and Average Unit
Price (R$/MWh)
Other
Products and Services –
CAA
Despite the fact that revenue from
loading services and energy sales were no longer considered under
CCA’s “Other products and services”, revenue from this line still grew by 21% chiefly due to
sales of molasses, fusel oil and sugarcane.
10 of
31
Rumo
In FY’10, Rumo concluded its first year
jointly operating in the Cosan Portuária and Teaçú terminals and began transport operations
through a partnership agreement with ALL, with total net revenues of R$158.2
million. Loading service volume grew by 131.4% over FY’09, from 3.5 million to 8.1 million
tonnes, 34.6% of which (or 2.8 million tonnes) being service provided to Cosan. This
result was achieved because of a merger of Teaçú, NovAmérica’s former terminal, and higher
productivity due to synergies and improvements in operational
processes.
The average cargo handling price
increased by 13.0% over
FY’09 to R$17.50/ton.
The transportation agreement entered
into with ALL became valid and executable in 4Q’10, generating additional revenue of
R$16.1 million in this quarter.
Loading Volume
Volume (million tonnes) and Average Unit
Price (R$/tonne)
11 of
31
Fuel Sales
–
CCL
CCL’s recorded FY’10 net revenue of R$ 10.1 billion,
226.6% up on the previous year, given that only four months of this
company’s results were consolidated in
FY’09, as mentioned previously. Fuel
segment revenue totaled R$ 9.4 billion, up by 226.1%. The main factors contributing
to the net revenue achieved in FY’10 were:
|
Þ
|
Ethanol sales of 803.2 million
liters, reflecting record vehicle licensing volume between April 2009 and
March 2010, 88% of which flex-fuel
vehicles;
|
|
Þ
|
Higher ethanol prices in the inter-harvest period,
which not only benefited hydrous net revenue, but also resulted in an
upturn in gasoline sales volume. This was because ethanol prices were
above 70% parity with gasoline prices in many Brazilian sates, causing
some flex-fuel owners to switch from ethanol to
gasoline, whose prices are higher (average of R$2,207/m3 in FY’10 versus R$942/m3 of
ethanol);
|
|
Þ
|
The acquisition of new corporate
clients, who accounted for an additional 210 million liters of Diesel in
FY’10, beyond the diesel volume sold to
CAA.
|
Fuel
Volume (million liters) and Average Unit
Price (R$/thousand liters)
12 of
31
Lubricant
Sales –
CCL
Lubricant sales totaled R$634 million,
thanks to the increased share of higher added-value products in the sales mix
and the upturn in market
share.
Lubricants
Volume (million liters) and Average Unit
Price (R$/thousand liters)
CCL Inventories
(Including Fuels and
Lubricants)
|
4Q'09
|
4Q'10
|
|
|
'000
cbm
|
138.5
|
137.5
|
|
R$'MM
|
274.4
|
266.5
|
|
R$/cbm
|
1,981
|
1,938
|
13 of
31
Cost of Goods Sold
(COGS)
COGS totaled R$13.2 billion, versus
R$5.5 billion in the previous year. This substantial upturn reflected the
12-month consolidation of fuel and lubricant distribution, which added R$ 9.4 billion to
annual COGS, versus R$2.9 billion in the previous year, when only four months of
this business unit were consolidated. In addition, CAA’s COGS increased by 60.5%, chiefly due
to higher sales volume, sugar sourcing activities, higher costs for sugar cane
acquired from third parties, the poor harvest and the reduction in TSR, the last
two due to excess rainfall in the harvest period.
|
4Q'09
|
4Q'10
|
COGS per
Product
|
FY'09
|
FY'10
|
|||||||||
|
(2,109.9
|
)
|
(3,620.3 | ) |
Cost
of Good Sold (R$MM)
|
(5,470.7 | ) | (13,210.7 | ) | |||||
|
(715.9
|
)
|
(1,296.9 | ) |
CAA
|
(2,533.8 | ) | (4,068.0 | ) | |||||
|
(343.1
|
)
|
(687.1 | ) |
Sugar
|
(1,313.1 | ) | (2,116.2 | ) | |||||
|
(353.1
|
)
|
(567.0 | ) |
Ethanol
|
(1,088.9 | ) | (1,745.5 | ) | |||||
|
(19.7
|
)
|
(42.8 | ) |
Other
Products & Services - CA
|
(131.9 | ) | (206.4 | ) | |||||
|
(8.3
|
)
|
(24.6 | ) |
Rumo
|
(40.1 | ) | (115.5 | ) | |||||
|
(1,405.0
|
)
|
(2,381.8 | ) |
CCL
|
(2,916.1 | ) | (9,374.6 | ) | |||||
|
19.3
|
83.0 |
Eliminations
from Consolidation
|
19.3 | 347.4 | |||||||||
|
Average
Unit Cost (R$)
|
|||||||||||||
|
482
|
593 |
Unit COGS of
Sugar (R$/ton)
|
430 | 512 | |||||||||
|
808
|
1,011 |
Unit COGS of
Ethanol (R$/thousand liters)
|
728 | 813 | |||||||||
|
1,681
|
1,757 |
CCL
(R$/thousand liters)
|
1,700 | 1,668 | |||||||||
CAA
The cost of goods sold and services
rendered totaled R$4.1 billion, accompanying sugar and ethanol sales growth and
reflecting the merger of NovAmérica and the strong impact of the lower
TSR obtained from the sugarcane, the upturn in the TSR price (due to higher sugar
prices in Brazil and abroad), mainly due to adverse weather conditions
throughout the harvest.
The R$1.5 billion increase, results from
the 19.1% upturn in average unit sugar costs and the 11.6% rise in average
unit ethanol costs, was
chiefly due to:
|
Þ
|
The increase in sugar sourcing
(purchase of the raw material to be refined and product for subsequent
resale and distribution on the domestic market), a traditional NovAmerica
practice, whose margins are lower and which had an impact of R$61
million;
|
|
Þ
|
The increase of 25.5% in the
average TSR price, as calculated by Consecana, from R$0.2772/Kg of TSR to
R$0.3492/Kg of TSR, which pushed up the cost of land leased and sugarcane
acquired from suppliers, adding approximately R$260
million;
|
|
Þ
|
The effect of lower concentration
in the TSR itself (cane sucrose content), from 139.0kg/ton of sugar cane
to 129.8kg/ton, surpassed the gains in efficiency in the process of
mechanization of the harvest, leading to additional costs of
R$180
million;
|
|
Þ
|
Thanks to excessive rainfall,
there were less effective crushing days. Consequently, 3.3 million tonnes of cane which were
expected to be processed were left in the fields, generating an impact on
the dilution of fixed agricultural costs (planting, treatment and
leasing).
|
14 of
31
|
Þ
|
Despite the harvesting
difficulties, CLT costs (cutting, loading and transport) has not increased
benefited from the mechanical harvest which accounted for 64.5% of the
total harvest, stood
at R$6.25/tonne of cane, cheaper than manual CLT
costs.
|
Rumo
Rumo’s COGS totaled R$115.5 million,
including loading and transportation costs, the latter consisting of costs from
transshipment, road and rail freight, and storage.
The variable part of the loading costs refer
mostly to stevedore expenses, port tariffs and electric power, while the fixed
part refers to operational labor, equipment rental, port leasing costs and
maintenance.
CCL
CCL’s average COGS recorded a decline of
R$32/m3 in FY’10, or 2%, lower than FY’09, primarily due to the reduction in
Petrobrás’ Diesel price and lower lubricant costs
due to the appreciation of the Real against the dollar. The reduction of the
average unit cost quoted above occurred despite the upturn in the inter-harvest ethanol costs,
which affected not only hydrous costs but also those of gasoline C, due to the
mandatory gasoline mix with anhydrous ethanol. In addition, between February and
April 2010, the ratio was reduced from 25% to 20% turning even more expensive the cost of
gasoline C.
Gross Profit
As a result, the Company recorded a
FY’10 gross profit of R$2.1 billion, an
increase of 165.9% compared to the previous year, with a gross margin equivalent
to 13.9%. The ethanol margin recovered throughout the harvest, reaching
breakeven at the close of the year. On the other hand, sugar recorded a positive
margin of 37.4%, partially benefiting from the increase in international prices
and sugar’s greater share of domestic sales. In
addition, CCL’s gross unit margin moved up by R$26/m3
to R$137/m3.
|
4Q'09
|
4Q'10
|
Gross Margin per
Product
|
FY'09
|
FY'10
|
|||||||||
|
Unitary
Gross Margin
|
|||||||||||||
|
224
|
456 |
Sugar
(R$/ton)
|
161 | 305 | |||||||||
|
(36
|
)
|
63 |
Ethanol
(R$/thousand liters)
|
58 | 1 | ||||||||
|
120
|
153 |
CCL
(R$/thousand liters)
|
111 | 137 | |||||||||
|
%
Gross Margin/Net Revenues
|
|||||||||||||
|
31.7
|
%
|
43.5 | % |
Sugar
|
27.3 | % | 37.4 | % | |||||
|
-4.6
|
%
|
5.8 | % |
Ethanol
|
7.4 | % | 0.1 | % | |||||
|
14.8
|
%
|
35.7 | % |
Rumo
|
25.6 | % | 27.0 | % | |||||
|
6.7
|
%
|
8.0 | % |
CCL
|
6.1 | % | 7.6 | % | |||||
15 of
31
Selling Expenses
Selling expenses increased by 100% compared to the previous year
mainly due to the merger of CCL, which contributed with R$400.1 million, and
NovAmérica (R$91.4
million).
|
4Q'09
|
4Q'10
|
Selling
Expenses
|
FY'09
|
FY'10
|
|||||||||
|
(101.5
|
) | (225.3 | ) |
Selling
Expenses (R$MM)
|
(432.6 | ) | (864.6 | ) | |||||
|
(49.1
|
)
|
(120.6 | ) |
CAA
|
(317.8 | ) | (464.5 | ) | |||||
|
-
|
- |
Rumo
|
- | - | |||||||||
|
(52.4
|
)
|
(104.7 | ) |
CCL
|
(114.7 | ) | (400.1 | ) | |||||
CAA
Excluding the effects from the
NovAmerica merger, CAA recorded selling expenses of R$373.1 million,17.4% higher
than the previous year, chiefly due to the following
factors:
|
Þ
|
The higher sugar exports caused an
increase in freight and loading expenses of around
14.4%.
|
|
Þ
|
The increase of 28% in the volume
of ethanol exports, which pushed up selling expenses by R$11.5
million.
|
|
Þ
|
Certain initiatives throughout the
year to improve the
efficiency of make the domestic sales management, including a reduction in
retail commissions and bonuses through the revision of sales contracts and
agreements in the case of sugar, and the elimination of less profitable
accounts.
|
Rumo
Given the nature of its business, Rumo has no selling
expenses.
CCL
CCL’s selling expenses are mostly related to
salaries and benefits, freight from product deliveries, maintenance, repairs and
environmental expenses and marketing. It is worth noting that this
fiscal year was
characterized by investments in marketing, maintenance and repairs, in order to
improve the image of the service stations, increase brand exposure and give more
visibility to ethanol.
16 of
31
General and Administrative
Expenses
G&A expenses totaled R$497.2
million, representing 3.2% of FY’10 net revenue, a hefty 80.2% up on the
R$275.9 million recorded in FY’09, primarily due to the entry of
NovAmérica (R$23.7
million), 12 months of expenses from CCL (R$92.7 million) and
Teaçu consolidation by
Rumo.
|
4Q'09
|
4Q'10
|
General & Administrative
Expenses
|
FY'09
|
FY'10
|
|||||||||
|
(78.2
|
)
|
(173.7 | ) |
G&A
Expenses (R$MM)
|
(275.9 | ) | (497.2 | ) | |||||
|
(62.0
|
)
|
(131.5 | ) |
CAA
|
(245.4 | ) | (386.3 | ) | |||||
|
0.2
|
|
(5.8 | ) |
Rumo
|
(5.7 | ) | (18.1 | ) | |||||
|
(16.4
|
)
|
(36.5 | ) |
CCL
|
(24.8 | ) | (92.7 | ) | |||||
CAA
G&A expenses came to R$386.3
million, 57.4% higher than in FY’09, chiefly due to the entry of
NovAmérica. The integration
of NovAmérica’s systems only took place in the second
half of 4Q’10, so its full effects will only be
reflected as of
1Q’11. Excluding this impact, G&A
expenses increased by 47.8%, due to the following factors:
|
Þ
|
Increase of around R$42.0 million
due to the provisioning of management and employee bonus
payments;
|
|
Þ
|
Upturn of around R$20.0 million in
expenses from
consulting services, due to projects such as the Shared Services Center
(CAN), the implementation of EVA and various other IT projects,
non-recurring events.
|
|
Þ
|
Approximately R$11.0 million from
the pay rise following the collective bargaining agreement and increase in other general
expenses, such as travel expenses driven by geographic dispersion from our
current different offices
sites;
|
|
Þ
|
Fine of R$3.5 million levied by
ANEEL due to breach of an energy supply contract by the Paraúna
unit;
|
Rumo
Rumo’s G&A expenses amounted to R$18.1
million, primarily related to the salaries and benefits, security, insurance and
consulting services.
CCL
CCL’s G&A expenses totaled R$92.7
million, jeopardized by the following non-recurring effects: (i) R$6.7 million
from adjustments due to the
transition to the CAN; (ii) additional profit-sharing and bonus provisions of
R$5.0 million and (iii) additions to legal proceeding reserves totaling R$1.2
million.
17 of
31
EBITDA
As a result of all the above, Cosan
posted record EBITDA of R$1.7 billion in FY’10, 86.3% more than its previous best of
R$930million in FY’07. Of this total, CAA contributed R$1.4
billion, 106.5% up on the previous year, while CCL and Rumo contributed R$332.0 million and R$42.8 million,
respectively. Even excluding the non- recurring effects of REFIS (federal tax
recovery program) and the sale of the aviation fuel business, EBITDA maintained
its historical level of R$1.4 billion.
|
4Q'09
|
4Q'10
|
EBITDA
|
FY'09
|
FY'10
|
|||||||||
|
165.9
|
575.9 |
EBITDA
(R$MM)
|
718.0 | 1,733.1 | |||||||||
|
7.1
|
%
|
13.1 | % |
Margin
|
11.5 | % | 11.3 | % | |||||
|
121.9
|
477.7 |
l
CAA
|
628.7 | 1,358.3 | |||||||||
|
14.1
|
%
|
25.3 | % |
Margin
|
19.8 | % | 25.2 | % | |||||
|
5.8
|
13.5 |
l
Rumo
|
24.7 | 42.8 | |||||||||
|
60.3
|
%
|
35.3 | % |
Margin
|
46.0 | % | 27.0 | % | |||||
|
38.1
|
84.6 |
l
CCL
|
64.5 | 332.0 | |||||||||
|
2.5
|
%
|
3.3 | % |
Margin
|
2.1 | % | 3.3 | % | |||||
CAA
Depreciation and amortization totaled
R$584.7 million, 43.1% more than the R$408.6 million reported in FY’09, due to heavy investments in order to
increase production efficiency through agricultural mechanization, co-generation
and industrial
improvements, as well as investments in increasing crushing capacity of the new
plants (greenfield units). If this non-cash effect is excluded from operating
costs and expenses, CAA recorded EBITDA of R$1.4 billion, chiefly due to the
following:
|
Þ
|
Adherence to the REFIS program, which
generated a positive impact of R$270.3 million, as explained in section F
below;
|
|
Þ
|
Non-operating revenue resulting
from a capital gain of R$93.1 million due to the sale of the aviation fuel
business. In December 2008, Cosan S.A. acquired CCL through its
subsidiary Cosanpar Participações, which sold this division in
June 2009 for R$115.6 million. The difference between this amount and the
amount booked under property, plant and equipment related to the aviation
fuel business were recorded in the other
operating income line, improving the EBITDA, as detailed in previous
Financial Letters.
|
|
Þ
|
Non-operating expenses of R$29.9
million from the merger of Teaçu Armazéns Gerais S.A.
|
Rumo
Rumo recorded EBITDA of R$42.8 million
in FY’10, showing an EBITDA margin of 27.0%.
It is worth noting that the company recorded R$9.4 million in other operating
income from dispatch/demurrage, take or pay and storage services, and a
non-recurring non-operating expense of R$5.4 million from accounting adjustments arising from the merger of
Teaçú. The depreciation and
amortization for the period were R$14.2 million.
18 of
31
CCL
Excluding the non-cash impact of
depreciation of R$37.5 million, CCL posted FY’10 EBITDA of R$332.0 million, with a
margin of R$59/m3, or 3.3% EBITDA margin versus 2.1% for the previous year, due
to the upturn in diesel, ethanol and gasoline sales volume, wider gasoline,
diesel and lubricant unit margins, and the capture of logistics synergies from the merger with
CAA.
Financial Result
The FY’10 net financial result was a positive
R$420.4 million, versus a negative R$817.4 million in the previous year, chiefly
fueled by the impact of the exchange variation on dollar-denominated debt, which was positive by R$559.0
million in FY’10 and negative by R$573.7 million in
FY’09.
The exchange impact was in turn mainly
due to the 37% appreciation of the U.S. dollar against the Real in
FY’09 (R$1.6872/US$ x R$2.3152/US$) and the
contrary effect in
FY’10, when the dollar fell by 23.1%
against the Real (R$2.3152/US$ x R$1.7810/US$). The foreign-currency debt has
also been increasing in recent years, having closed FY’08, FY’09 and FY’10 at R$1.6 billion, R$2.3 billion and
R$3.6 billion, respectively.
Interest on the gross debt totaled
R$414.3 million, versus R$244.5 million in FY’09, chiefly due to the upturn from the
merger of NovAmérica, which
was consolidated as of June 2009, and the funding for the acquisition of CCL,
which impacted only four
months in FY’09.
|
4Q'09
|
4Q'10
|
Financial Expenses, Net
(R$MM)
|
FY'09
|
FY'10
|
|||||||||
|
(68.3
|
)
|
(101.5 | ) |
Interest on
Financial Debt
|
(244.5 | ) | (414.3 | ) | |||||
|
9.6
|
10.8 |
Financial
Investments Income
|
64.6 | 52.5 | |||||||||
|
(58.7
|
)
|
(90.7 | ) |
(=)
Sub-total: Interest on Net Financial Del
|
(179.9 | ) | (361.8 | ) | |||||
|
4.7
|
(27.9 | ) |
Other
interest and monetary variation
|
(90.8 | ) | (116.6 | ) | ||||||
|
5.2
|
(70.0 | ) |
Exchange
Variation
|
(573.7 | ) | 559.0 | |||||||
|
(125.4
|
)
|
168.8 |
Gains
(losses) with Derivatives
|
47.7 | 330.9 | ||||||||
|
(19.1
|
)
|
6.0 |
Others
|
(20.7 | ) | 8.8 | |||||||
|
(193.4
|
)
|
(13.7 | ) |
(=)
Net Financial Expenses
|
(817.4 | ) | 420.4 | ||||||
Sugar volume and price positions with
Trading companies and derivatives on March 31, 2009, as well as foreign exchange
hedge contracts to protect the Company’s future cash flows are as
follows:
19 of
31
|
Summary of Hedge* as of March 31,
2010:
|
Fiscal Year
|
|||||||
| 2010/11 | 2011/12 | |||||||
|
Sugar
|
||||||||
|
NY#11
|
||||||||
|
Volume
(thd tons)
|
1,659.4 | 512.7 | ||||||
|
Average
Price (¢US$/lb)
|
20.3 | 17.9 | ||||||
|
London
#5
|
||||||||
|
Volume
(thd tons)
|
79.0 | - | ||||||
|
Average
Price (US$/ton)
|
622.1 | - | ||||||
|
FX
|
||||||||
|
US$
|
||||||||
|
Volume
(US$ million)
|
472.3 | 170.0 | ||||||
|
Average
Price (R$/US$)
|
1.99 | 2.03 | ||||||
Note: For sugar we
considerer options once they are in the money as a hedge while for FX
derivatives we consider the Delta, regardless if in or out of the
money
EBITDAH
EBITDAH totaled R$2.1 billion, versus
R$1.7 billion for EBITDA before hedge operations. As can be seen in the graph
below, the net hedge result was a positive R$330.9 million, versus a positive
R$47.7 million in FY’09. FX derivatives generated a gain of
R$517.2 million, helping to
mitigate the negative impact of the dollar devaluation on revenue from
dollar-denominated sales. Commodities derivatives recorded a loss of R$186.2
million, versus a gain of R$64.0 million in FY’09, reflecting the recovery of
international sugar prices throughout most
of 2010.
EBITDAH (R$
MM)
20 of
31
The table below gives a breakdown of
EBITDAH per business segment:
|
4Q'09
|
4Q'10
|
EBITDAH
|
FY'09
|
FY'10
|
|||||||||
|
40.4
|
744.7 |
EBITDAH
(R$MM)
|
765.7 | 2,064.0 | |||||||||
|
1.8
|
%
|
16.3 | % |
Margin
|
12.1 | % | 13.2 | % | |||||
|
(3.5
|
)
|
646.6 |
l
CAA
|
676.4 | 1,689.2 | ||||||||
|
-0.5
|
%
|
32.0 | % |
Margin
|
21.3 | % | 29.6 | % | |||||
|
24.7
|
13.5 |
l
Rumo
|
24.7 | 41.8 | |||||||||
|
-
|
35.3 | % |
Margin
|
- | 26.6 | % | |||||||
|
38.1
|
84.6 |
l
CCL
|
64.5 | 332.0 | |||||||||
|
2.5
|
%
|
3.3 | % |
Margin
|
2.1 | % | 3.3 | % | |||||
Net Income
Cosan posted FY’10 net income of R$986.5 million, versus
a net loss of R$473.8
million the year before, fueled by the positive impact of higher sales volume
and prices on all segments of the business, which pushed up the gross margin by
R$1.3 billion, the effect of the exchange variation on dollar-denominated debt
and the benefits from the Refis
program.
Net Income (R$
million)
D. Financial
Situation
Cosan closed
FY’09 with gross financial
debt of R$5.3 billion (excluding Resolution
24711), 42% up on the R$3.7
billion recorded at the end of FY’09 and just 3.3% up on
the R$5.2 billion posted at the close of 3Q’10.
In November 2009, the Company
implemented several measures to improve its debt profile, including full
settlement of the
promissory notes, the 209 senior notes, bank credit certificates and debentures,
the last two resulting from the acquisition of NovAmérica and the contracting of: (i) US$ 430
million in export repayments, maturing in 5 years; (ii) US$ 100 million
in export credit notes (NCEs), maturing
in 3 years; (iii) R$ 300 million in export credit certificates (CCE), maturing
in 2 years; and (iv) the disbursement by the BNDES (Brazilian Development Bank)
of part of the funding for Jataí and Gasa.
1 As
disclosed in
Note 13 to the financial statements, the Resolution 2471 debt is pegged to
Brazilian treasury certificates acquired by the Company and recognized under
current and non-current assets. Consequently, this debt was excluded from the
analysis of indebtedness.
21 of
31
In 4Q’10, the Company opted to prepay
financing of R$90 million with the IFC due to its high cost, given that a
portion is linked to the Group’s operating cash flow. In addition, the
BNDES disbursed R$123.4
million in new contracted loans and the Company contracted additional FINAME
funding of around R$100.0 million, for machinery and equipment purchases. In the
4Q’10, a loan named “Proinfa” has been reclassified to the BNDES line
as well as for part of the FINAME loan amounting to
approximately R$40.0 million.
|
Debt per Type
(R$MM)
|
FY'09
|
3T'10
|
4Q'10
|
% ST
|
Var.
|
|||||||||||||||
|
Foreign
Currency
|
2,334.9 | 3,415.8 | 3,622.5 | 206.6 | ||||||||||||||||
|
Perpetual
Notes
|
1,054.1 | 792.8 | 810.9 | 1.2 | % | 18.12 | ||||||||||||||
|
Senior Notes
2017
|
936.7 | 716.7 | 720.6 | 1.1 | % | 3.91 | ||||||||||||||
|
Senior Notes
2009
|
86.5 | - | - | 0.0 | % | - | ||||||||||||||
|
Senior Notes
2014
|
- | 632.3 | 631.2 | 1.2 | % | (1.01 | ) | |||||||||||||
|
IFC
|
114.3 | 90.9 | - | 0.0 | % | (90.94 | ) | |||||||||||||
|
FX
Advances
|
143.3 | 223.2 | 296.4 | 100.0 | % | 73.19 | ||||||||||||||
|
Pre-Export
Contracts
|
- | 960.0 | 980.5 | 20.5 | % | 20.51 | ||||||||||||||
|
Export Credit
Notes
|
- | - | 182.8 | 2.6 | % | 182.83 | ||||||||||||||
|
Local
Currency
|
1,420.1 | 1,749.0 | 1,711.4 | (37.69 | ) | |||||||||||||||
|
Promissory
Notes
|
1,162.0 | - | - | 0.0 | % | - | ||||||||||||||
|
BNDES
|
230.5 | 844.8 | 1,057.8 | 8.2 | % | 213.00 | ||||||||||||||
|
Finame
(BNDES)
|
44.7 | 156.1 | 201.1 | 16.0 | % | 45.02 | ||||||||||||||
|
Working
Capital
|
25.2 | 20.0 | 19.5 | 23.1 | % | (0.54 | ) | |||||||||||||
|
Overdraft
|
0.1 | 42.0 | 36.8 | 100.0 | % | (5.19 | ) | |||||||||||||
|
Credit
Banking Notes
|
- | 121.1 | - | 0.0 | % | (121.06 | ) | |||||||||||||
|
Credit
Notes
|
- | 510.5 | 378.7 | 20.8 | % | (131.75 | ) | |||||||||||||
|
CDCA
|
- | 60.2 | 61.4 | 51.2 | % | 1.26 | ||||||||||||||
|
PROINFA
|
- | 42.2 | - | 0.0 | % | (42.16 | ) | |||||||||||||
|
Expenses with
Placement of Debt
|
(42.4 | ) | (47.7 | ) | (44.0 | ) | 35.6 | % | 3.73 | |||||||||||
|
Gross
Debt
|
3,755.0 | 5,164.9 | 5,333.8 | 14.9 | % | 168.92 | ||||||||||||||
|
Cash and
Marketable Securities
|
719.4 | 864.1 | 1,078.4 | 214.29 | ||||||||||||||||
|
Net
Debt
|
3,035.6 | 4,300.8 | 4,255.4 | (45.37 | ) | |||||||||||||||
Cosan ended the year with a cash
position of R$1.1 billion, reducing net debt to R$4.3 billion, or 2.4 times
EBITDA in the last 12 months. This EBITDA is calculated using CAA and CCL’s last 12 month EBITDA and
NovAmérica’s annualized last 10 month
EBITDA.
E. Investments
Cosan’s investment flows totaled R$1.8 billion
in FY’10, totaling capex of R$1.9 billion,
chiefly in greenfield projects, co-generation projects, planting and inter-harvest
maintenance, less R$115.5 million from the sale of the aviation fuel
business.
Consolidated capex was 43.1% higher than
in the previous year, mainly due to the inclusion of NovAmérica’s assets, investments of R$143.8
million by Rumo, the return
of planting costs to historical levels and the inclusion of CCL for the entire
year, versus only four months in FY’09.
22 of
31
|
4Q'09
|
4Q'10
|
Capex
(R$MM)
|
FY'09
|
FY'10
|
|||||||||
|
167.2
|
307.8 |
CAA
- Capex Operacional
|
553.7 | 722.5 | |||||||||
|
22.0
|
47.3 |
l Sugar Cane
Planting Costs
|
118.9 | 211.9 | |||||||||
|
84.3
|
197.7 |
l Inter-harvest
Maintenance Costs
|
144.4 | 260.9 | |||||||||
|
*
|
22.3 |
l SSHE &
Sustaining
|
* | 45.0 | |||||||||
|
*
|
30.5 |
l
Mechanization
|
* | 30.5 | |||||||||
|
61.0
|
10.1 |
l Projects
CAA
|
290.4 | 174.2 | |||||||||
|
160.9
|
245.7 |
Operating
Capex - CAA
|
781.2 | 972.0 | |||||||||
|
53.4
|
112.0 |
l Co-generation
Projects
|
325.8 | 376.4 | |||||||||
|
107.5
|
46.1 |
l
Greenfield
|
455.4 | 462.2 | |||||||||
|
*
|
87.5 |
l
Expansion
|
* | 133.4 | |||||||||
|
328.1
|
553.5 |
Capex
- CAA
|
1,334.8 | 1,694.5 | |||||||||
|
6.4
|
48.1 |
CCL
|
11.3 | 87.8 | |||||||||
|
-
|
143.8 |
Rumo
|
- | 143.8 | |||||||||
|
334.6
|
745.4 |
(=)
Capex - Consolidated Cosan
|
1,346.1 | 1,926.1 | |||||||||
|
227.7
|
30.7 |
l
Investments
|
1,823.6 | 16.0 | |||||||||
|
(372.1
|
)
|
(5.3 | ) |
l Cash received on
Sale of Fixed Assets
|
(372.1 | ) | (126.2 | ) | |||||
|
190.3
|
770.8 |
(=)
Investment Cash Flow
|
2,797.6 | 1,815.9 | |||||||||
|
*
FY’09
figures unavailable,
investments previously included in the Projects CAA
line
|
|||||||||||||
CAA
In FY’10, the Company’s planting investments totaled R$211.9
million, representing a return to historical levels. Planted area came to 53,600
hectares, versus 28,100 hectares in FY’09. Land preparation in as yet unplanted
areas is also included in this line.
Inter-harvest maintenance investments
totaled R$260.9 million, chiefly due to the addition of the NovAmérica units and the impact of the shorter
inter-harvest period, which
increased the need for third-party services.
As of this quarter, investments in
“Health, Safety &
Environment” and
Sustaining, which came to R$45.0 million in FY’10, will be recognized separately in
order to highlight those investments in our units designed to generate gains in
efficiency.
The company invested R$30.5 million in
mechanization, giving a mechanization ratio of 64.5%.
Various CAA projects absorbed R$174.2
million, mainly consisting of investments in the industrial and agricultural
areas, aiming to increase
the productivity and efficiency of the company’s units.
Energy co-generation investments
amounted to R$376.4 million, 15% up on the year before, reflecting the
conclusion of certain projects (Copi, Gasa and Rafard), the operational
start-up of two major
projects (Barra and Bonfim) and the beginning of works in other
plants.
Greenfield capex totaled R$462.2 million,
associated with the concluding phase of the Jataí (GO) and Caarapó (MS) projects.
Expansion projects absorbed R$133.4
million, related to the
expansion of the Costa Pinto, Gasa, Bonfim, Barra, Tamoio, Ipaussu and Junqueira
sugar plants, increasing the company’s production capacity by approximately
400,000 tones per year.
In June 2009, the Company concluded the
acquisition of NovAmérica (for more details, see section G
– Material
Facts).
23 of
31
Rumo
Rumo began investing in locomotives and
rolling stock in 4Q’10, totaling R$143.8 million in
FY’10. The company received a BNDES
financing line to acquire
these assets.
CCL
CCL invested R$87.8 million in
improvements to service stations, terminal expansions and renovations. The R$76
million increase over FY’09 was mainly due to the inclusion of a
full year of the company’s investments for the first time in FY’10.
F. Effects of the Tax Recovery Program
(“Refis”)
The Company entered in the Tax Recovery
program set by the Brazilian Government in accordance with law No. 11.941/09 and
Provisional Measure MP 470/09. In the scope of these programs, Cosan had reductions in tax
liabilities contingent, mainly related to recovery of taxes and federal
contributions with IPI credit and IPI credit on purchases of raw material and
inputs with zero tax rate, exempt and not exempt, which generated a benefit in the quarter, recognized
under other operating revenues, in the amount of R$ 270.3 million. Additionally,
this program also enabled the company to use income tax losses credits in the
amount of approximately R$ 204 million, to reduce tax obligations that were previously being the
subject contest of dispute by the Company. This last benefit, in spite of not
impacting the result under the accounting point of view, benefited the Company
in the sense that the mentioned tax credits are used only as the Company presents profit according to
tax criteria, and is limited to 30% compensation in each annual
period.
G. Material Facts
|
●
|
In March 2009, Cosan announced a
partnership with Nova América Agroenergia S.A. for the
merger of the assets related to the sale, logistics and industrial
production of sugar and ethanol and energy cogeneration. On June 18, the
Extraordinary Shareholders’ Meeting approved the merger of
Curupay, the company resulting from the ownership restructuring of Nova
América.
Following the transaction, COSAN now holds:
four sugar and ethanol production units, the traditional brand
”União”, which is the leader in
Brazil’s refined sugar market, two sugar
refineries (Piedade and Tarumã), four sugar packaging units
(Piedade, Tarumã,
Sertãozinho and Araquari), an 8% interest
in Terminal Exportador de Álcool de Santos S.A.
(“TEAS”), and a 28.8% interest in Rumo
Logística. As a
result of the merger, Cosan S.A. issued 44,300,389 new shares, which
correspond to 11.89% of its new capital stock, and which were attributed to Rezende
Barbosa, for a capital increase of R$334.2 million. Mr. Roberto Rezende
Barbosa was elected a member of the Board of Directors of Cosan
S.A.
|
|
●
|
On August 4, 2009, CCL Finance
Limited, an indirect Cosan subsidiary, concluded an overseas issue of senior notes
totaling US$ 350 million at 9.625% p.a., with a dollar
coupon
|
24 of
31
of 9.5% p.a.. The senior notes are
guaranteed by CCL and their final maturity date is August 2014. This
was one of the first
emerging-market corporate bond issue with a BB- rating assigned by Fitch and
S&P to reopen the high-yield company market after the financial crisis which
froze the credit market.
|
●
|
On October 15, 2009, continuing with the process of
professionalizing the
Company and in-line with corporate governance best practices, Mr. Rubens
O. Silveira Mello resigned from his position as CEO of Cosan S.A., keeping
his position as Chairman of the Board, to fully engage in the
Company’s strategic management. As of November 1, 2009, Mr.
Marcos Marinho Lutz, former Commercial and Logistic Executive Officer and
Vice-President, was appointed as
CEO.
|
|
●
|
On September 14, 2009, Cosan
Limited disposed of 10,000,000 subscription bonuses, part of the
54,993,482 bonuses
that had been granted as per capital increase made at Cosan S.A. on
November 10, 2008.
|
|
●
|
By the end of 2009, the
Company’s first greenfield began operations in the city of
Jataí, in Goiás state. With a crushing capacity
of 4 million tonnes p.a., the Jataí plant is considered to be among
the most modern in Brazil and the world, thanks to its
exceptionally high level of automation. Caarapó greenfield also started operating this
period, with crushing capacity of approximately 2.5 million tons of
cane.
|
|
●
|
On November 24th, the Company acquired a
26.7% of participation in TEAS, an ethanol port terminal in Santos, for the amount of R$20 million,
becoming the owner of 66.67% of this society’s total and voting
capital
|
|
●
|
On December 24, 2009, Rumo
Logística notified
ALL – América Latina Logística S.A. that as of that date
the long-term agreements entered into by the two parties in March 2009
were valid and executable in all their terms and conditions, in the form
set forth therein. The object of the agreements include the transportation by ALL of bulk
sugar and other byproducts, with the expansion of the parties’ operational capacity through
investments of around R$ 1.2 billion in rights of way, yards, rail cars,
locomotives and terminals to be realized by Rumo in ALL’s network.
|
|
●
|
The period for the exercise of
subscription warrants conferred during the capital increase of Cosan S.A.
on November 10, 2008, expired on December 31, 2009. A total of 54,987,554
warrants were exercised, increasing the Company's capital by
32,992,531 new
shares. Cosan Limited exercised all of the warrants it held, subscribing
to 26,996,089 new Cosan S.A. shares and increasing the latter’s capital by R$ 431,937,424.00,
while other shareholders were responsible for exercising warrants
corresponding to 5,996,442 new shares,
equivalent to R$
95,943,072.00.
|
|
●
|
In December 2009, Cosan and Amyris
announced a partnership to implement Amyris’ technology in one of the
Group’s plants to produce high
added-value biofuels, involving investments of up to R$ 50 million. In addition to sugar and
ethanol, the unit will also be capable of producing a chemical compound
resulting from the fermentation of sugarcane juice and yeast. Both
companies are still studying the details regarding the implementation and
funding of these operations. For Cosan,
investments in the development of new renewable energy sources such as
biofuels are strategic, and the partnership with Amyris underlines this
commitment.
|
|
●
|
On February 1, 2010, Cosan and
Shell International Petroleum Company Ltd. entered into a non-binding
memorandum of understanding, subject to an exclusivity period
of
|
25 of
31
|
●
|
180 days, for the creation of a
joint venture (“JV”) combining certain of their
respective assets. Cosan would contribute its sugar, ethanol
and energy cogeneration businesses, fuel distribution and retail
businesses, its ethanol logistics assets and its entire participation in
an ethanol trading company. Shell would contribute its fuel distribution
and retail businesses (including aviation) in
Brazil and its equity stakes in
companies involved in the research and development of biomass, including
ethanol. Additionally, Cosan would transfer net debt of approximately
US$2,524 million to the JV and Shell would, over a period of two years, make a
cash capital contribution of approximately US$1,625 million and a
contingent contribution, estimated by Cosan at US$300 million, over a
period of about 5 years, as additional contribution based on future gains
of the Joint Venture. The JV is likely to
consist of two separate legal entities: a sugar and ethanol company
(upstream), which will focus on the production of sugar and ethanol and
co-generation activities, receiving the assets related to this business,
and a downstream company, which would conduct the
supply, distribution and sale of fuels in Brazil, through network of about
4,500 fuel stations throughout Brazil, and the JV would be the third
largest fuels retailer, with strong potential for future
growth.
|
|
●
|
On March 15, the Company announced the key
executives that will lead this potential Joint Venture and assume their
respective positions once the negotiations are concluded and the Joint
Venture is formalized. Vasco Dias, the CEO of Shell Brasil, will be the
CEO of the JV. Pedro Mizutani will maintain
his current responsibilities for sugar and ethanol production and
co-generation. Luis Henrique Guimarães will be responsible for the
area of Downstream, which covers the Retail, Commercial and Aviation
segments. Leonardo Gadotti Filho will be responsible
for the Logistics, Supply &Distribution areas. And finally, Carlos
Alberto Piotrowski will keep his current responsibilities for managing the
Shared Service Center - CAN.
|
|
●
|
On March 24, Rumo announced a
logistics project and
service agreement involving the transshipment and rail transportation of
sugar with São
Martinho S.A. The agreement consists of 2 phases: phase 1, which will last
until March 31, 2011, and envisages that (i) Usina São Martinho will provide cargo
transshipment services involving at least
500,000 tonnes of third-party sugar in its Terminal; and (ii) Rumo will
transport 300,000 tonnes of sugar for São Martinho, in addition to the
above mentioned third-party volume. Additionally, Rumo will also grant
São Martinho the right to hire static
storage capacity in its Port of Santos terminals, the respective volumes
and conditions of which to be determined every harvest year. In phase 2,
São Martinho will
make the investments necessary to implement a transshipment terminal and Rumo will be
responsible for investing in any eventual adaptations to the rail
transportation system to make the transshipment of additional volumes in
the terminal of Usina São Martinho possible in 2010 and
2011.
|
|
●
|
On April 28, Rumo received
the first 120 of the
729 rail cars that were ordered to Ioschpe Maxion and Randon. Fifty
locomotives have also been ordered to GE, which will be delivered starting
June 2010.
|
26 of
31
H. Guidance
This section contains guidance
ranges for selected key parameters of the Company for the fiscal year 2011,
which began on April 1st, 2010 and will end on
March 31st, 2011. Note that
statements in other sections of this letter may also contain projections. These
projections and guidance
are merely estimates and indicative, and should not be construed as a guarantee
of future performance.
This guidance takes into consideration
the operations held by the Cosan group today, which includes CAA, CCL, and Rumo
Logística.
|
Guidance
|
2009FY
|
2010FY
|
2011FY
|
||||
|
Crushed Cane
Volume (thousand tons)
|
43,127
|
50,314
|
58.000
≤ ∆ ≤
62.000
|
||||
|
Sugar Volume
Sold (thousand tons)
|
3,187
|
4,135
|
4.700
≤ ∆ ≤
5.100
|
||||
|
Ethanol
Volume Sold (million liters)
|
1,671
|
2,148
|
2.000
≤ ∆ ≤
2.200
|
||||
|
Volume of
Energy Sold (thousand MWh)
|
-
|
596
|
1.200
≤ ∆ ≤
1.500
|
||||
|
Loading
Volume (thousand tons)
|
3,479
|
8,124
|
9.500 ≤ ∆ ≤
11.500
|
||||
|
Transportation
Volume (thousand tons)
|
-
|
-
|
5.500
≤ ∆ ≤
6.500
|
||||
|
Volume of
Fuels Sold (million liters)
|
1,681
|
5,491
|
5.400
≤ ∆ ≤
5.900
|
||||
|
Volume of
Lubes Sold (million liters)
|
34
|
131
|
130
≤ ∆ ≤
150
|
||||
|
Revenues
(R$MM)
|
6,270
|
15,336
|
16.500
≤ ∆ ≤
18.500
|
||||
|
EBITDA
(R$MM)
|
718
|
1,733
|
2.000
≤ ∆ ≤
2.400
|
||||
|
Capex
(R$MM)
|
1,346
|
1,926
|
1.900
≤ ∆ ≤
2.300
|
27 of
31
I. Financial Statements of Cosan S.A.
– BR GAAP
|
Income
Statement
|
Apr'08
|
Mar'09
|
Mar'10
|
Jul'08
|
Oct'08
|
Jan'09
|
Mar'09
|
Jun'09
|
Sep'09
|
Dec'09
|
Mar'10
|
||||||||||||||||||||||||||||||||||
|
(In million of
reais)
|
FY'08
|
FY'09
|
FY'10
|
1Q'09
|
2Q'09
|
3Q'09
|
4Q'09
|
1Q'10
|
2Q'10
|
3Q'10
|
4T'10
|
||||||||||||||||||||||||||||||||||
|
Gross
Operating Revenue
|
2,978.6 | 6,732.8 | 16,685.9 | 692.7 | 760.1 | 2,746.4 | 2,533.6 | 3,843.5 | 3,907.2 | 4,145.1 | 4,790.0 | ||||||||||||||||||||||||||||||||||
|
(-)
|
Sales Taxes
and Deductions
|
(242.5 | ) | (462.7 | ) | (1,349.8 | ) | (53.1 | ) | (45.0 | ) | (180.7 | ) | (183.8 | ) | (277.4 | ) | (331.9 | ) | (344.6 | ) | (395.9 | ) | ||||||||||||||||||||||
|
(=)
|
Net
Operating Revenue
|
2,736.2 | 6,270.1 | 15,336.1 | 639.6 | 715.1 | 2,565.6 | 2,349.8 | 3,566.1 | 3,575.3 | 3,800.5 | 4,394.1 | |||||||||||||||||||||||||||||||||
|
(-)
|
Cost of Goods
Sold and Services Rendered
|
(2,387.1 | ) | (5,470.7 | ) | (13,210.7 | ) | (626.0 | ) | (547.1 | ) | (2,187.6 | ) | (2,109.9 | ) | (3,198.4 | ) | (3,051.5 | ) | (3,340.5 | ) | (3,620.3 | ) | ||||||||||||||||||||||
|
(=)
|
Gross
Profit
|
349.0 | 799.4 | 2,125.4 | 13.6 | 167.9 | 378.0 | 239.9 | 367.7 | 523.8 | 460.0 | 773.9 | |||||||||||||||||||||||||||||||||
|
Margin
|
12.8 | % | 12.7 | % | 13.9 | % | 2.1 | % | 23.5 | % | 14.7 | % | 10.2 | % | 10.3 | % | 14.7 | % | 12.1 | % | 17.6 | % | |||||||||||||||||||||||
|
(-)
|
Operating
Income (Expenses):
|
(418.0 | ) | (1,508.5 | ) | (712.5 | ) | (94.9 | ) | (754.7 | ) | (319.6 | ) | (339.4 | ) | 117.9 | (246.1 | ) | (206.9 | ) | (377.4 | ) | |||||||||||||||||||||||
|
(-)
|
Selling
|
(301.3 | ) | (432.6 | ) | (864.6 | ) | (85.7 | ) | (88.6 | ) | (156.8 | ) | (101.5 | ) | (209.6 | ) | (211.3 | ) | (218.4 | ) | (225.3 | ) | ||||||||||||||||||||||
|
(-)
|
General and
Administrative
|
(210.2 | ) | (275.9 | ) | (497.2 | ) | (59.7 | ) | (65.7 | ) | (72.3 | ) | (78.2 | ) | (89.3 | ) | (116.2 | ) | (117.9 | ) | (173.7 | ) | ||||||||||||||||||||||
|
(-)
|
Financial
Income (Expenses), Net
|
284.3 | (817.4 | ) | 420.4 | 86.9 | (551.8 | ) | (159.2 | ) | (193.4 | ) | 433.4 | 78.9 | (78.3 | ) | (13.7 | ) | |||||||||||||||||||||||||||
| (±) |
Earnings
(Losses) on Equity Investments
|
6.6 | 14.0 | (18.6 | ) | 0.2 | (0.3 | ) | 13.6 | 0.5 | (3.6 | ) | 0.0 | (9.4 | ) | (5.8 | ) | ||||||||||||||||||||||||||||
|
(-)
|
Goodwill
Amortization
|
(201.4 | ) | (196.5 | ) | (85.6 | ) | (40.4 | ) | (40.4 | ) | (65.2 | ) | (50.5 | ) | (85.6 | ) | - | - | - | |||||||||||||||||||||||||
| (±) |
Other
Operating Income(Expenses), Net
|
4.0 | 199.9 | 333.1 | 3.9 | (8.0 | ) | 120.2 | 83.7 | 72.5 | 2.5 | 217.0 | 41.1 | ||||||||||||||||||||||||||||||||
| (=) |
Operating
Income (Loss)
|
(69.0 | ) | (709.1 | ) | 1,412.9 | (81.3 | ) | (586.7 | ) | 58.5 | (99.5 | ) | 485.6 | 277.8 | 253.0 | 396.5 | ||||||||||||||||||||||||||||
|
Margin
|
-2.5 | % | -11.3 | % | 9.2 | % | -12.7 | % | -82.0 | % | 2.3 | % | -4.2 | % | 13.6 | % | 7.8 | % | 6.7 | % | 9.0 | % | |||||||||||||||||||||||
| (±) |
Income
and Social Contribution Taxes
|
18.7 | 234.7 | (433.8 | ) | 22.4 | 205.9 | (53.3 |
)
|
59.6 | (157.9 | ) | (103.8 | ) | (85.3 | ) | (86.9 | ) | |||||||||||||||||||||||||||
|
(±)
|
Minority
Interest
|
2.5 | 0.6 | 7.5 | 0.8 | 0.1 | 0.0 | (0.4 | ) | 9.6 | (0.6 | ) | (0.7 | ) | (0.9 | ) | |||||||||||||||||||||||||||||
| (=) |
Net
Income (Loss) for the Year
|
(48.0 | ) | (474.0 | ) | 986.5 | (58.0 | ) | (381.0 | ) | 5.0 | (40.0 | ) | 337.0 | 173.0 | 167.0 | 309.0 | ||||||||||||||||||||||||||||
|
Margin
|
-1.8 | % | -7.6 | % | 6.4 | % | -9.1 | % | -53.3 | % | 0.2 | % | -1.7 | % | 9.5 | % | 4.8 | % | 4.4 | % | 7.0 | % | |||||||||||||||||||||||
|
l
|
EBITDA | 182.9 | 718.0 | 1,733.1 | 29.2 | 182.5 | 340.4 | 165.9 | 311.2 | 355.7 | 490.4 |
575.9
|
|||||||||||||||||||||||||||||||||
|
Margin
|
6.7 | % | 11.5 | % | 11.3 | % | 4.6 | % | 25.5 | % | 13.3 | % | 7.1 | % | 8.7 | % | 9.9 | % | 12.9 | % | 13.1 | % | |||||||||||||||||||||||
|
l
|
EBITDAH
(Ebitda adjusted by Hedge)
|
407.8 | 765.7 | 2,064.0 | 74.4 | 185.5 | 465.3 | 40.4 | 472.0 | 338.9 | 508.4 | 744.7 | |||||||||||||||||||||||||||||||||
|
Margin
|
13.8 | % | 12.1 | % | 13.2 | % | 10.9 | % | 25.8 | % | 17.3 | % | 1.8 | % | 12.7 | % | 9.5 | % | 13.3 | % | 16.3 | % | |||||||||||||||||||||||
|
l
|
Depreciation
& Amortization
|
341.3 | 427.2 | 636.3 | 157.2 | 176.8 | 71.1 | 22.0 | 169.9 | 156.8 | 149.7 | 160.0 | |||||||||||||||||||||||||||||||||
|
Balance
Sheet
|
Apr'08
|
Mar'09
|
Mar'10
|
Jul'08
|
Oct'08
|
Jan'09
|
Mar'09
|
Jun'09
|
Sep'09
|
Dec'09
|
Mar'10
|
||||||||||||||||||||||||||||||||||
|
(In million of
reais)
|
FY'08
|
FY'09
|
FY'10
|
1Q'09
|
2Q'09
|
3Q'09
|
4Q'09
|
1Q'10
|
2Q'10
|
3Q'10
|
4T'10
|
||||||||||||||||||||||||||||||||||
|
Cash and Cash
Equivalents
|
1,010.1 | 719.4 | 1,078.4 | 633.9 | 1,276.3 | 689.7 | 719.4 | 932.9 | 948.6 | 864.1 | 1,078.4 | ||||||||||||||||||||||||||||||||||
|
Restricted
Cash
|
79.6 | 11.8 | 45.0 | 79.4 | 0.2 | 11.9 | 11.8 | 40.1 | 149.5 | 172.1 | 45.0 | ||||||||||||||||||||||||||||||||||
|
Derivative
Financial Instruments
|
6.9 | 17.0 | 230.6 | 9.0 | 8.6 | 6.1 | 17.0 | 86.6 | 97.4 | 72.0 | 230.6 | ||||||||||||||||||||||||||||||||||
|
Trade Accounts
Receivable
|
215.2 | 599.2 | 766.4 | 115.5 | 215.9 | 459.0 | 599.2 | 585.6 | 589.7 | 511.1 | 766.4 | ||||||||||||||||||||||||||||||||||
|
Inventories
|
570.5 | 1,106.2 | 1,046.7 | 905.6 | 1,439.9 | 1,643.7 | 1,106.2 | 1,149.9 | 1,531.5 | 1,936.8 | 1,046.7 | ||||||||||||||||||||||||||||||||||
|
Advances to
Suppliers
|
226.1 | 206.0 | 235.6 | 252.3 | 287.0 | 239.9 | 206.0 | 386.1 | 336.7 | 241.2 | 235.6 | ||||||||||||||||||||||||||||||||||
|
Related
Parties
|
16.3 | 57.2 | 24.9 | 1.1 | 28.4 | 35.8 | 57.2 | 36.1 | 21.6 | 24.6 | 24.9 | ||||||||||||||||||||||||||||||||||
|
Deferred
Income and Social Contribution Taxes
|
- | 42.5 | 76.3 | - | - | - | 42.5 | 53.5 | 48.1 | 29.2 | 76.3 | ||||||||||||||||||||||||||||||||||
|
Recoverable
Taxes
|
129.8 | 265.4 | 327.9 | 121.3 | 160.6 | 240.7 | 265.4 | 299.0 | 342.9 | 307.8 | 327.9 | ||||||||||||||||||||||||||||||||||
|
Other
Assets
|
17.9 | 50.3 | 61.2 | 21.9 | 37.1 | 82.3 | 50.3 | 32.7 | 41.7 | 54.0 | 61.2 | ||||||||||||||||||||||||||||||||||
|
Current
Assets
|
2,272.4 | 3,074.9 | 3,892.8 | 2,140.0 | 3,453.9 | 3,409.0 | 3,074.9 | 3,602.6 | 4,107.9 | 4,212.8 | 3,892.8 | ||||||||||||||||||||||||||||||||||
|
Accounts
Receivable from Federal Government
|
342.2 | 323.4 | 333.7 | 342.2 | 342.2 | 342.2 | 323.4 | 326.4 | 329.0 | 331.4 | 333.7 | ||||||||||||||||||||||||||||||||||
|
CTN's-Restricted
Brazilian Treasury Bills
|
151.7 | 177.6 | 205.7 | 164.8 | 170.9 | 175.5 | 177.6 | 184.7 | 189.3 | 194.6 | 205.7 | ||||||||||||||||||||||||||||||||||
|
Deferred
Income and Social Contribution Taxes
|
357.0 | 700.0 | 560.1 | 386.7 | 567.8 | 665.0 | 700.0 | 644.6 | 551.5 | 334.2 | 560.1 | ||||||||||||||||||||||||||||||||||
|
Advances to
Suppliers
|
77.3 | 48.0 | 63.7 | 88.2 | 93.6 | 125.3 | 48.0 | 55.5 | 85.1 | 132.5 | 63.7 | ||||||||||||||||||||||||||||||||||
|
Related
Parties
|
- | - | 81.4 | - | - | - | - | 153.2 | 151.8 | 149.9 | 81.4 | ||||||||||||||||||||||||||||||||||
|
Other
Assets
|
94.4 | 132.4 | 211.8 | 124.1 | 124.0 | 159.1 | 132.4 | 185.4 | 190.2 | 210.8 | 211.8 | ||||||||||||||||||||||||||||||||||
|
Investments
|
120.3 | 278.2 | 193.1 | 124.2 | 184.7 | 280.5 | 278.2 | 181.3 | 196.5 | 194.0 | 193.1 | ||||||||||||||||||||||||||||||||||
|
Property,
Plant and Equipment
|
2,776.3 | 3,465.2 | 5,561.1 | 2,882.8 | 3,020.8 | 3,389.0 | 3,465.2 | 4,516.4 | 4,671.4 | 4,871.5 | 5,561.1 | ||||||||||||||||||||||||||||||||||
|
Goodwill
|
1,160.7 | 2,447.5 | 2,901.3 | 1,115.6 | 1,074.5 | 2,493.8 | 2,447.5 | 2,724.3 | 2,737.5 | 2,765.5 | 2,901.3 | ||||||||||||||||||||||||||||||||||
|
Noncurrent
Assets
|
5,079.9 | 7,572.5 | 10,112.0 | 5,228.5 | 5,578.5 | 7,630.4 | 7,572.5 | 8,971.7 | 9,102.3 | 9,184.4 | 10,112.0 | ||||||||||||||||||||||||||||||||||
| (=) |
Total
Assets
|
7,352.4 | 10,647.4 | 14,004.8 | 7,368.5 | 9,032.4 | 11,039.4 | 10,647.4 | 12,574.3 | 13,210.2 | 13,397.2 | 14,004.8 | |||||||||||||||||||||||||||||||||
|
Loans and
Financings
|
78.2 | 1,449.5 | 800.9 | 74.2 | 311.0 | 1,480.6 | 1,449.5 | 1,127.4 | 1,184.7 | 892.6 | 800.9 | ||||||||||||||||||||||||||||||||||
|
Derivatives
Financial Instruments
|
50.7 | 66.9 | 76.7 | 19.3 | 32.6 | 49.5 | 66.9 | 98.9 | 215.4 | 232.9 | 76.7 | ||||||||||||||||||||||||||||||||||
|
Trade Accounts
Payable
|
191.0 | 456.1 | 569.4 | 331.6 | 489.9 | 518.2 | 456.1 | 662.8 | 712.5 | 712.1 | 569.4 | ||||||||||||||||||||||||||||||||||
|
Salaries
Payable
|
80.7 | 93.2 | 141.6 | 119.0 | 143.0 | 77.7 | 93.2 | 152.3 | 180.9 | 133.0 | 141.6 | ||||||||||||||||||||||||||||||||||
|
Taxes and
Social Contributions Payable
|
116.1 | 168.6 | 215.9 | 115.0 | 109.7 | 163.2 | 168.6 | 189.8 | 230.9 | 201.0 | 215.9 | ||||||||||||||||||||||||||||||||||
|
Related
Parties
|
- | 5.2 | 14.4 | - | - | 2.5 | 5.2 | 4.5 | 3.8 | 50.5 | 14.4 | ||||||||||||||||||||||||||||||||||
|
Dividendos a
pagar
|
- | - | 116.6 | - | - | - | - | - | - | - | 116.6 | ||||||||||||||||||||||||||||||||||
|
Other
Liabilities
|
49.9 | 85.8 | 182.4 | 34.4 | 126.1 | 66.6 | 85.8 | 134.1 | 100.7 | 123.4 | 182.4 | ||||||||||||||||||||||||||||||||||
|
Current
Liabilities
|
566.5 | 2,325.2 | 2,117.9 | 693.4 | 1,212.3 | 2,358.2 | 2,325.2 | 2,369.7 | 2,629.0 | 2,345.5 | 2,117.9 | ||||||||||||||||||||||||||||||||||
|
Loans and
Financing
|
2,106.2 | 2,885.5 | 5,136.5 | 2,047.9 | 2,679.3 | 2,904.5 | 2,885.5 | 4,091.4 | 4,667.4 | 4,859.1 | 5,136.5 | ||||||||||||||||||||||||||||||||||
|
Taxes and
Social Contributions Payable
|
359.3 | 328.8 | 593.5 | 351.5 | 346.1 | 336.0 | 328.8 | 335.5 | 288.9 | 255.7 | 593.5 | ||||||||||||||||||||||||||||||||||
|
Provision for
Legal Proceedings
|
832.4 | 1,105.9 | 444.4 | 849.8 | 873.1 | 1,114.1 | 1,105.9 | 1,135.5 | 1,143.4 | 755.7 | 444.4 | ||||||||||||||||||||||||||||||||||
|
Related
Parties
|
- | 405.2 | - | - | - | 405.3 | 405.2 | 341.5 | - | - | - | ||||||||||||||||||||||||||||||||||
|
Pension
Fund
|
- | 60.4 | 61.8 | - | - | 58.5 | 60.4 | 61.0 | 62.3 | 61.6 | 61.8 | ||||||||||||||||||||||||||||||||||
|
Other
Liabilities
|
144.4 | 139.9 | 493.1 | 141.3 | 138.4 | 134.8 | 139.9 | 169.2 | 168.4 | 155.8 | 493.1 | ||||||||||||||||||||||||||||||||||
|
Noncurrent
Liabilities
|
3,442.3 | 4,925.5 | 6,729.3 | 3,390.5 | 4,037.0 | 4,953.1 | 4,925.5 | 6,134.1 | 6,330.3 | 6,087.8 | 6,729.3 | ||||||||||||||||||||||||||||||||||
|
Minority
Shareholders' Interest
|
17.7 | 30.9 | 47.8 | 17.0 | 20.3 | 31.5 | 30.9 | 29.9 | 30.4 | 47.0 | 47.8 | ||||||||||||||||||||||||||||||||||
|
Capital
|
2,935.3 | 3,819.8 | 4,687.8 | 2,935.3 | 3,815.3 | 3,815.3 | 3,819.8 | 4,153.9 | 4,155.3 | 4,687.7 | 4,687.8 | ||||||||||||||||||||||||||||||||||
|
Capital
Reserve
|
- | 41.7 | 50.6 | - | (4.2 | ) | (4.2 | ) | 41.7 | 45.1 | 50.2 | 50.1 | 50.6 | ||||||||||||||||||||||||||||||||
|
Profits
Reserve
|
180.2 | - | 374.2 | 180.2 | 180.2 | 180.2 | - | - | - | - | 374.2 | ||||||||||||||||||||||||||||||||||
|
Legal
Reserve
|
16.0 | - | - | 16.0 | 16.0 | 16.0 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
|
Revaluation
Reserves
|
194.4 | - | - | 194.2 | 193.8 | 93.2 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
|
Ajuste de
Avaliação Patrimonial
|
- | - | (2.9 | ) | - | - | - | - | - | - | - | (2.9 | ) | ||||||||||||||||||||||||||||||||
|
Accumulated
losses
|
- | (495.7 | ) | - | (57.9 | ) | (438.2 | ) | (403.9 | ) | (495.7 | ) | (158.4 | ) | 15.0 | 179.1 | - | ||||||||||||||||||||||||||||
|
Shareholders'
Equity
|
3,325.8 | 3,365.7 | 5,109.8 | 3,267.7 | 3,762.8 | 3,696.6 | 3,365.7 | 4,040.7 | 4,220.5 | 4,917.0 | 5,109.8 | ||||||||||||||||||||||||||||||||||
| (=) | Total Liabilities & Shareholders' Equity | 7,352.4 | 10,647.4 | 14,004.8 | 7,368.5 | 9,032.4 | 11,039.4 | 10,647.4 | 12,574.3 | 13,210.2 | 13,397.2 | 14,004.8 | |||||||||||||||||||||||||||||||||
28 of
31
|
Cash Flow
Statement
|
Apr'08
|
Mar'09
|
Mar'10
|
Jul'08
|
Oct'08
|
Jan'09
|
Mar'09
|
Jun'09
|
Sep'09
|
Dec'09
|
Mar'10
|
|||||||||||||||||||||||||||||||||
|
(In millions of
reais)
|
FY'08
|
FY'09
|
FY'10
|
1Q'09
|
2Q'09
|
3Q'09
|
4Q'09
|
1Q'10
|
2Q'10
|
3Q'10
|
4T'10
|
|||||||||||||||||||||||||||||||||
|
Net
Income (Loss) for the Year
|
(47.8 | ) | (473.8 | ) | 986.5 | (58.1 | ) | (380.7 | ) | 5.2 | (40.2 | ) | 337.3 | 173.4 | 167.1 | 308.7 | ||||||||||||||||||||||||||||
|
Non-cash
Adjustments:
|
||||||||||||||||||||||||||||||||||||||||||||
|
Earnings
(Losses) from Equity Investments
|
(6.6 | ) | (14.0 | ) | 18.6 | (0.2 | ) | 0.3 | (13.6 | ) | (0.5 | ) | 3.6 | (0.0 | ) | 9.4 | 5.8 | |||||||||||||||||||||||||||
|
Depreciation
& Amortization
|
341.3 | 427.2 | 636.3 | 157.2 | 176.8 | 71.1 | 22.0 | 169.9 | 156.8 | 149.7 | 160.0 | |||||||||||||||||||||||||||||||||
|
Losses (Gains)
in Fixed Assets Disposals
|
(1.2 | ) | (208.9 | ) | (80.5 | ) | 1.2 | 4.5 | 3.0 | (217.6 | ) | (103.2 | ) | 0.8 | 1.1 | 20.8 | ||||||||||||||||||||||||||||
|
Goodwill
Amortization
|
201.4 | 196.5 | 85.6 | 40.4 | 40.4 | 65.2 | 50.5 | 85.6 | - | - | - | |||||||||||||||||||||||||||||||||
|
Accrued
Financial Expenses
|
(116.0 | ) | 932.5 | (150.5 | ) | (26.2 | ) | 572.0 | 297.8 | 89.0 | (287.8 | ) | (84.0 | ) | (60.5 | ) | 281.9 | |||||||||||||||||||||||||||
|
Other Non-cash
Items
|
(42.4 | ) | (197.9 | ) | 104.2 | (32.2 | ) | (162.9 | ) | 49.3 | (52.1 | ) | 133.1 | 74.0 | (154.1 | ) | 51.2 | |||||||||||||||||||||||||||
|
(=)
Adjusted Net Profit (Loss)
|
328.8 | 661.5 | 1,600.3 | 82.0 | 250.4 | 478.0 | (148.9 | ) | 338.5 | 321.0 | 112.6 | 828.3 | ||||||||||||||||||||||||||||||||
|
(±) Variation
on Assets and Liabilities
|
(360.1 | ) | (234.5 | ) | (42.5 | ) | (129.5 | ) | (399.0 | ) | (140.7 | ) | 434.7 | 195.7 | (312.9 | ) | (142.7 | ) | 217.3 | |||||||||||||||||||||||||
|
(=)
Cash Flow from Operating Activities
|
(31.3 | ) | 427.0 | 1,557.8 | (47.4 | ) | (148.6 | ) | 337.3 | 285.8 | 534.2 | 8.1 | (30.1 | ) | 1,045.7 | |||||||||||||||||||||||||||||
|
Additions on
Investments, Net of Cash Received
|
(160.5 | ) | (1,823.6 | ) | (16.0 | ) | (0.7 | ) | (61.4 | ) | (1,533.7 | ) | (227.7 | ) | 58.5 | (29.2 | ) | (14.7 | ) | (30.7 | ) | |||||||||||||||||||||||
|
Additions on
Property, Plant and Equipment
|
(1,053.1 | ) | (1,346.1 | ) | (1,926.1 | ) | (264.8 | ) | (314.3 | ) | (432.4 | ) | (334.6 | ) | (420.6 | ) | (359.1 | ) | (401.0 | ) | (745.4 | ) | ||||||||||||||||||||||
|
Cash Received
on Sale of Fixed Asset
|
12.2 | 372.1 | 126.2 | 1.6 | (1.6 | ) | - | 372.1 | 117.7 | 1.5 | 1.8 | 5.3 | ||||||||||||||||||||||||||||||||
|
(=)
Cash Flow from Investment Activities
|
(1,201.4 | ) | (2,797.6 | ) | (1,816.0 | ) | (263.9 | ) | (377.4 | ) | (1,966.1 | ) | (190.3 | ) | (244.3 | ) | (386.8 | ) | (413.9 | ) | (770.9 | ) | ||||||||||||||||||||||
|
Additions of
Debt
|
198.3 | 1,478.0 | 3,427.9 | 3.0 | 315.8 | 1,196.4 | (37.1 | ) | 172.9 | 1,045.8 | 1,665.5 | 543.8 | ||||||||||||||||||||||||||||||||
|
Payments of
Principal and Interest on Debt
|
(839.4 | ) | (257.2 | ) | (2,846.6 | ) | (67.8 | ) | (26.7 | ) | (148.3 | ) | (14.4 | ) | (127.8 | ) | (317.3 | ) | (1,838.4 | ) | (563.1 | ) | ||||||||||||||||||||||
|
Capital
Increase
|
1,742.6 | 884.5 | 533.9 | - | 880.0 | - | 4.5 | - | 1.4 | 532.4 | 0.1 | |||||||||||||||||||||||||||||||||
|
Treasury
Stock
|
- | (4.2 | ) | - | - | (4.2 | ) | - | - | - | - | - | - | |||||||||||||||||||||||||||||||
|
Capital
Increase at subsidiaries
|
- | 15.4 | - | - | 3.5 | - | 11.9 | - | - | - | - | |||||||||||||||||||||||||||||||||
|
Dividends
|
(75.8 | ) | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
|
Other
|
- | (36.6 | ) | (498.0 | ) | - | - | (5.9 | ) | (30.7 | ) | (121.4 | ) | (335.4 | ) | - | (41.3 | ) | ||||||||||||||||||||||||||
|
(=)
Cash Flows from Financing Activities
|
1,025.7 | 2,079.9 | 617.1 | (64.8 | ) | 1,168.4 | 1,042.2 | (65.8 | ) | (76.3 | ) | 394.4 | 359.5 | (60.5 | ) | |||||||||||||||||||||||||||||
|
(=)
Total Cash Flow
|
(207.0 | ) | (290.7 | ) | 359.0 | (376.2 | ) | 642.4 | (586.7 | ) | 29.7 | 213.6 | 15.7 | (84.6 | ) | 214.3 | ||||||||||||||||||||||||||||
|
(+) Cash &
Equivalents, Beginning
|
1,217.1 | 1,010.1 | 719.4 | 1,010.1 | 633.9 | 1,276.3 | 689.7 | 719.4 | 932.9 | 948.6 | 864.1 | |||||||||||||||||||||||||||||||||
|
(=)
Cash & Equivalents, Closing
|
1,010.1 | 719.4 | 1,078.4 | 633.9 | 1,276.3 | 689.7 | 719.4 | 932.9 | 948.6 | 864.1 | 1,078.4 | |||||||||||||||||||||||||||||||||
|
Credit Statistics
(LTM)
|
Apr'08
|
Mar'09
|
Mar'10
|
Jul'08
|
Oct'08
|
Jan'09
|
Mar'09
|
Jun'09
|
Sep'09
|
Dec'09
|
Mar'10
|
|||||||||||||||||||||||||||||||||
|
(In million of
reais)
|
FY'08
|
FY'09
|
FY'10
|
1Q'09
|
2Q'09
|
3Q'09
|
4Q'09
|
1Q'10
|
2Q'10
|
3Q'10
|
4T'10
|
|||||||||||||||||||||||||||||||||
|
Net
Operating Revenues
|
2,736.2 | 6,270.1 | 15,336.1 | 2,784.1 | 2,871.6 | 4,763.3 | 6,270.1 | 9,196.6 | 12,056.9 | 13,291.7 | 15,336.1 | |||||||||||||||||||||||||||||||||
|
l Gross
Profit
|
349.0 | 799.4 | 2,125.4 | 318.9 | 410.5 | 708.9 | 799.4 | 1,153.6 | 1,509.4 | 1,591.4 | 2,125.4 | |||||||||||||||||||||||||||||||||
|
l
EBITDA
|
182.9 | 718.0 | 1,733.1 | 159.6 | 264.0 | 602.1 | 718.0 | 1,000.0 | 1,173.1 | 1,323.1 | 1,733.1 | |||||||||||||||||||||||||||||||||
|
l
EBIT
|
(158.4 | ) | 290.8 | 1,096.8 | (213.5 | ) | (147.0 | ) | 167.7 | 290.8 | 560.2 | 753.3 | 824.7 | 1,096.8 | ||||||||||||||||||||||||||||||
|
l Encargos
Financeiros da Dívida Líquida
|
106.2 | 179.9 | 361.8 | 91.9 | 85.2 | 136.1 | 179.9 | 247.0 | 308.4 | 329.8 | 361.8 | |||||||||||||||||||||||||||||||||
|
l Net
Profit
|
(47.8 | ) | (473.8 | ) | 986.5 | (119.6 | ) | (515.5 | ) | (438.9 | ) | (473.8 | ) | (78.4 | ) | 475.6 | 637.5 | 986.5 | ||||||||||||||||||||||||||
|
Liquid
Funds
|
||||||||||||||||||||||||||||||||||||||||||||
|
l Cash and Cash
Equivalents
|
1,010.1 | 719.4 | 1,078.4 | 633.9 | 1,276.3 | 689.7 | 719.4 | 932.9 | 1,098.2 | 864.1 | 1,078.4 | |||||||||||||||||||||||||||||||||
|
Short-Term
Debt
|
||||||||||||||||||||||||||||||||||||||||||||
|
l Loans and
Financings
|
69.3 | 1,442.7 | 793.8 | 62.9 | 298.6 | 1,475.3 | 1,442.7 | 1,115.9 | 1,171.6 | 886.5 | 793.8 | |||||||||||||||||||||||||||||||||
|
Long-Term
Debt
|
||||||||||||||||||||||||||||||||||||||||||||
|
l Loans and
Financings
|
1,562.5 | 2,312.3 | 4,540.0 | 1,474.9 | 2,101.7 | 2,327.6 | 2,312.3 | 3,508.5 | 4,086.8 | 4,278.4 | 4,540.0 | |||||||||||||||||||||||||||||||||
|
Total
Debt
|
1,631.8 | 3,755.0 | 5,333.8 | 1,537.7 | 2,400.3 | 3,802.9 | 3,755.0 | 4,624.4 | 5,258.3 | 5,164.9 | 5,333.8 | |||||||||||||||||||||||||||||||||
|
Net
Debt
|
621.7 | 3,035.6 | 4,255.4 | 903.8 | 1,124.0 | 3,113.3 | 3,035.6 | 3,691.5 | 4,160.2 | 4,300.8 | 4,255.4 | |||||||||||||||||||||||||||||||||
|
Current
Assets
|
2,272.4 | 3,074.9 | 3,892.8 | 2,140.0 | 3,453.9 | 3,409.0 | 3,074.9 | 3,602.6 | 4,107.9 | 4,212.8 | 3,892.8 | |||||||||||||||||||||||||||||||||
|
Current
Liabilities
|
566.5 | 2,325.2 | 2,117.9 | 693.4 | 1,212.3 | 2,358.2 | 2,325.2 | 2,369.7 | 2,629.0 | 2,345.5 | 2,117.9 | |||||||||||||||||||||||||||||||||
|
Shareholders'
Equity
|
3,325.8 | 3,365.7 | 5,109.8 | 3,267.7 | 3,762.8 | 3,696.6 | 3,365.7 | 4,040.7 | 4,220.5 | 4,917.0 | 5,109.8 | |||||||||||||||||||||||||||||||||
|
Capex
- Property, Plant and Equipment
|
1,053.1 | 1,346.1 | 1,180.7 | 1,147.4 | 1,324.5 | 1,485.9 | 1,346.1 | 1,501.9 | 1,546.7 | 1,515.3 | 1,180.7 | |||||||||||||||||||||||||||||||||
|
l Capex -
Operational
|
781.9 | 565.0 | 500.2 | 796.9 | 762.7 | 727.5 | 565.0 | 588.7 | 626.5 | 673.9 | 500.2 | |||||||||||||||||||||||||||||||||
|
EBITDA
Margin
|
6.7 | % | 11.5 | % | 11.3 | % | 5.7 | % | 9.2 | % | 12.6 | % | 11.5 | % | 10.9 | % | 9.7 | % | 10.0 | % | 11.3 | % | ||||||||||||||||||||||
|
l Gross Profit
Margin
|
12.8 | % | 12.7 | % | 13.9 | % | 11.5 | % | 14.3 | % | 14.9 | % | 12.7 | % | 12.5 | % | 12.5 | % | 12.0 | % | 13.9 | % | ||||||||||||||||||||||
|
l EBIT
Margin
|
-5.8 | % | 4.6 | % | 7.2 | % | -7.7 | % | -5.1 | % | 3.5 | % | 4.6 | % | 6.1 | % | 6.2 | % | 6.2 | % | 7.2 | % | ||||||||||||||||||||||
|
l Net Profit
Margin
|
-1.7 | % | -7.6 | % | 6.4 | % | -4.3 | % | -18.0 | % | -9.2 | % | -7.6 | % | -0.9 | % | 3.9 | % | 4.8 | % | 6.4 | % | ||||||||||||||||||||||
|
Net
Debt ÷ Shareholders' Equity
|
||||||||||||||||||||||||||||||||||||||||||||
|
l Net Debt
%
|
15.8 | % | 47.4 | % | 45.4 | % | 21.7 | % | 23.0 | % | 45.7 | % | 47.4 | % | 47.7 | % | 49.6 | % | 46.7 | % | 45.4 | % | ||||||||||||||||||||||
|
l Shareholders'
Equity %
|
84.2 | % | 52.6 | % | 54.6 | % | 78.3 | % | 77.0 | % | 54.3 | % | 52.6 | % | 52.3 | % | 50.4 | % | 53.3 | % | 54.6 | % | ||||||||||||||||||||||
|
Long-Term
Payable Debt to Equity Ratio
|
0.5 | x | 0.7 | x | 0.9 | x | 0.5 | x | 0.6 | x | 0.6 | x | 0.7 | x | 0.9 | x | 1.0 | x | 0.9 | x | 0.9 | x | ||||||||||||||||||||||
|
Liquidity
Ratio (Current Assets ÷ Current Liabilities)
|
4.0 | x | 1.3 | x | 1.8 | x | 3.1 | x | 2.8 | x | 1.4 | x | 1.3 | x | 1.5 | x | 1.6 | x | 1.8 | x | 1.8 | x | ||||||||||||||||||||||
|
Net
Debt ÷ EBITDA
|
3.4 | x | 4.2 | x | 2.5 | x | 5.7 | x | 4.3 | x | 5.2 | x | 4.2 | x | 3.7 | x | 3.5 | x | 3.3 | x | 2.5 | x | ||||||||||||||||||||||
|
l Short-Term Net
Debt ÷ EBITDA
|
0.4 | x | 2.0 | x | 0.5 | x | 0.4 | x | 1.1 | x | 2.5 | x | 2.0 | x | 1.1 | x | 1.0 | x | 0.7 | x | 0.5 | x | ||||||||||||||||||||||
|
Net
Debt ÷ (EBITDA - Capex)
|
-0.7x | -4.8x | 7.7 | x | -0.9x | -1.1x | -3.5x | -4.8x | -7.4x | -11.1x | -22.4x | 7.7 | x | |||||||||||||||||||||||||||||||
|
l Net Debt ÷
(EBITDA - Operational Capex)
|
-1.0x | 19.8 | x | 3.5 | x | -1.4x | -2.3x | -24.8x | 19.8 | x | 9.0 | x | 7.6 | x | 6.6 | x | 3.5 | x | ||||||||||||||||||||||||||
|
Interest
Cover (EBITDA ÷ Net Financial Exp.)
|
1.7 | x | 4.0 | x | 4.8 | x | 1.7 | x | 3.1 | x | 4.4 | x | 4.0 | x | 4.0 | x | 3.8 | x | 4.0 | x | 4.8 | x | ||||||||||||||||||||||
|
l Interest Cover
(EBITDA - Op.Capes)÷Net Fin.)
|
-5.6x | 0.9 | x | 3.4 | x | -6.9x | -5.9x | -0.9x | 0.9 | x | 1.7 | x | 1.8 | x | 2.0 | x | 3.4 | x | ||||||||||||||||||||||||||
|
Avg.
Debt Cost (Net.Fin.Exp. ÷ Net Debt)
|
17.1 | % | 5.9 | % | 8.5 | % | 10.2 | % | 7.6 | % | 4.4 | % | 5.9 | % | 6.7 | % | 7.4 | % | 7.7 | % | 8.5 | % | ||||||||||||||||||||||
29 of
31
J. Financial Statements of Cosan Ltd.
– US GAAP
|
Income
Statement
|
Apr'08
|
Apr'09
|
Mar'10
|
Jul'08
|
Oct'08
|
Jan'09
|
Apr'09
|
Jun'09
|
Sep'09
|
Dec'09
|
Mar'10
|
||||||||||||||||||||||||||||||||||
|
(In millions of U.S.
dollars)
|
FY'08
|
FY'09
|
FY'10
|
1Q'09
|
2Q'09
|
3Q'09
|
4Q'09
|
1Q'10
|
2Q'10
|
3Q'10
|
4T'10
|
||||||||||||||||||||||||||||||||||
|
Net
sales
|
1,491.2 | 2,926.5 | 8,283.2 | 394.0 | 383.8 | 1,103.4 | 1,045.3 | 1,720.3 | 1,915.7 | 2,209.5 | 2,437.7 | ||||||||||||||||||||||||||||||||||
|
(-)
|
Cost of goods
sold
|
(1,345.6 | ) | (2,621.9 | ) | (7,223.3 | ) | (398.9 | ) | (320.2 | ) | (950.3 | ) | (952.4 | ) | (1,561.4 | ) | (1,655.5 | ) | (1,965.3 | ) | (2,041.1 | ) | ||||||||||||||||||||||
|
(=)
|
Gross
profit
|
145.6 | 304.6 | 1,059.9 | (4.9 | ) | 63.6 | 153.0 | 92.8 | 158.8 | 260.1 | 244.3 | 396.6 | ||||||||||||||||||||||||||||||||
|
(-)
|
Selling
expenses
|
(168.6 | ) | (213.3 | ) | (470.3 | ) | (53.0 | ) | (47.9 | ) | (67.6 | ) | (44.7 | ) | (102.1 | ) | (115.1 | ) | (128.0 | ) | (125.2 | ) | ||||||||||||||||||||||
|
(-)
|
General and
administrative expenses
|
(115.1 | ) | (140.1 | ) | (271.3 | ) | (36.3 | ) | (34.9 | ) | (42.2 | ) | (26.8 | ) | (7.9 | ) | (62.8 | ) | (106.7 | ) | (93.9 | ) | ||||||||||||||||||||||
|
(=) Operating income
(loss)
|
(138.1 | ) | (48.8 | ) | 318.3 | (94.2 | ) | (19.2 | ) | 43.2 | 21.4 | 48.9 | 82.3 | 9.6 | 177.6 | ||||||||||||||||||||||||||||||
|
Operating
margin
|
-9.3 | % | -1.7 | % | 3.8 | % | -23.9 | % | -5.0 | % | 3.9 | % | 2.0 | % | 2.8 | % | 4.3 | % | 0.4 | % | 7.3 | % | |||||||||||||||||||||||
|
(-)
|
Other income
(expense):
|
||||||||||||||||||||||||||||||||||||||||||||
|
Financial
|
116.8 | (370.8 | ) | 203.7 | 26.5 | (234.4 | ) | (137.2 | ) | (25.7 | ) | 215.7 | 64.1 | (80.4 | ) | 4.2 | |||||||||||||||||||||||||||||
|
Other
|
(3.7 | ) | (2.3 | ) | 178.9 | (3.5 | ) | (8.1 | ) | 6.6 | 2.7 | (7.9 | ) | 0.9 | 155.5 | 30.5 | |||||||||||||||||||||||||||||
|
(=)
|
Income
(loss) before income taxes
|
(25.0 | ) | (421.9 | ) | 700.9 | (71.2 | ) | (261.7 | ) | (87.3 | ) | (1.6 | ) | 256.7 | 147.3 | 84.7 | 212.3 | |||||||||||||||||||||||||||
|
(-)
|
Income taxes
expense (benefit)
|
19.8 | 144.7 | (184.8 | ) | 23.2 | 94.5 | (1.7 | ) | 28.7 | (76.5 | ) | (49.4 | ) | (52.3 | ) | (6.5 | ) | |||||||||||||||||||||||||||
|
(=)
|
Income
(loss) before equity
|
(5.2 | ) | (277.2 | ) | 516.2 | (48.0 | ) | (167.2 | ) | (89.1 | ) | 27.1 | 180.1 | 97.9 | 32.4 | 205.8 | ||||||||||||||||||||||||||||
|
(±)
|
Equity in
income of affiliates
|
(0.2 | ) | 6.1 | (10.3 | ) | 0.1 | 1.2 | 5.2 | (0.3 | ) | (1.7 | ) | 0.0 | (3.8 | ) | (4.8 | ) | |||||||||||||||||||||||||||
|
(±)
|
Minority
interest in net (income) loss
|
22.0 | 83.0 | (174.0 | ) | 18.6 | 52.0 | 19.3 | (6.9 | ) | (55.8 | ) | (34.0 | ) | (7.3 | ) | (77.0 | ) | |||||||||||||||||||||||||||
|
(=)
|
Net
income (loss)
|
16.6 | (188.1 | ) | 331.9 | (29.3 | ) | (114.1 | ) | (64.6 | ) | 19.9 | 122.6 | 63.9 | 21.3 | 124.0 | |||||||||||||||||||||||||||||
|
Margin
|
1.1 | % | -6.4 | % | 4.0 | % | -7.4 | % | -29.7 | % | -5.9 | % | 1.9 | % | 7.1 | % | 3.3 | % | 1.0 | % | 5.1 | % | |||||||||||||||||||||||
|
l EBITDA
|
94.3 | 239.6 | 985.8 | 14.6 | 72.2 | 92.2 | 60.7 | 140.3 | 190.9 | 338.8 | 315.8 | ||||||||||||||||||||||||||||||||||
|
Margin
|
6.3 | % | 8.2 | % | 11.9 | % | 3.7 | % | 18.8 | % | 8.4 | % | 5.8 | % | 8.2 | % | 10.0 | % | 15.3 | % | 13.0 | % | |||||||||||||||||||||||
|
l EBIT
|
(141.8 | ) | (51.1 | ) | 497.3 | (97.7 | ) | (27.3 | ) | 49.9 | 24.1 | 40.9 | 83.1 | 165.1 | 208.1 | ||||||||||||||||||||||||||||||
|
Margin
|
-9.5 | % | -1.7 | % | 6.0 | % | -24.8 | % | -7.1 | % | 4.5 | % | 2.3 | % | 2.4 | % | 4.3 | % | 7.5 | % | 8.5 | % | |||||||||||||||||||||||
|
l Depreciation and
amortization
|
236.1 | 290.7 | 488.5 | 112.3 | 99.5 | 42.3 | 36.6 | 99.3 | 107.7 | 173.7 | 107.7 | ||||||||||||||||||||||||||||||||||
|
Balance
Sheet
|
Apr'08
|
Mar'09
|
Mar'10
|
Jul'08
|
Oct'08
|
Jan'09
|
Mar'09
|
Jun'09
|
Sep'09
|
Dec'09
|
Mar'10
|
||||||||||||||||||||||||||||||||||
|
(In millions of U.S.
dollars)
|
FY'08
|
FY'09
|
FY'10
|
1Q'09
|
2Q'09
|
3Q'09
|
4Q'09
|
1Q'10
|
2Q'10
|
3Q'10
|
4T'10
|
||||||||||||||||||||||||||||||||||
|
Assets
|
|||||||||||||||||||||||||||||||||||||||||||||
|
Current
assets:
|
|||||||||||||||||||||||||||||||||||||||||||||
|
Cash and cash
equivalents
|
68.4 | 508.8 | 623.7 | 86.3 | 62.6 | 100.5 | 508.8 | 676.3 | 769.1 | 516.7 | 623.7 | ||||||||||||||||||||||||||||||||||
|
Restricted
cash
|
47.2 | 5.1 | 25.3 | 50.7 | 0.1 | 5.1 | 5.1 | 20.5 | 84.1 | 98.8 | 25.3 | ||||||||||||||||||||||||||||||||||
|
Marketable
securities
|
1,014.5 | - | - | 804.2 | 771.5 | 397.0 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
|
Derivative
financial instruments
|
31.5 | 7.4 | 129.5 | 65.3 | 86.8 | 3.7 | 7.4 | 44.4 | 54.8 | 41.4 | 129.5 | ||||||||||||||||||||||||||||||||||
|
Trade accounts
receivable, net
|
126.9 | 258.9 | 430.3 | 73.0 | 101.9 | 197.9 | 258.9 | 300.1 | 331.6 | 293.5 | 430.3 | ||||||||||||||||||||||||||||||||||
|
Inventories
|
337.7 | 477.8 | 587.7 | 577.6 | 680.5 | 709.5 | 477.8 | 589.2 | 861.3 | 1,112.3 | 587.7 | ||||||||||||||||||||||||||||||||||
|
Advances to
suppliers
|
133.7 | 89.0 | 132.3 | 160.8 | 135.5 | 103.5 | 89.0 | 200.8 | 189.4 | 138.6 | 132.3 | ||||||||||||||||||||||||||||||||||
|
Deferred
income taxes
|
- | 114.6 | 184.1 | - | - | 25.7 | 114.6 | 153.2 | 192.8 | 176.8 | 184.1 | ||||||||||||||||||||||||||||||||||
|
Other current
assets
|
103.2 | 66.0 | 49.2 | 99.7 | 132.6 | 158.4 | 66.0 | 69.0 | 56.1 | 54.1 | 49.2 | ||||||||||||||||||||||||||||||||||
|
|
1,863.0 | 1,527.5 | 2,161.9 | 1,917.6 | 1,971.5 | 1,701.3 | 1,527.5 | 2,053.5 | 2,539.3 | 2,432.2 | 2,161.9 | ||||||||||||||||||||||||||||||||||
|
Noncurrent
assets:
|
|||||||||||||||||||||||||||||||||||||||||||||
|
Property,
plant and equipment, net
|
2,018.1 | 2,259.4 | 4,146.5 | 2,217.3 | 1,738.6 | 1,828.8 | 2,259.4 | 3,178.1 | 3,554.3 | 3,737.0 | 4,146.5 | ||||||||||||||||||||||||||||||||||
|
Goodwill
|
772.6 | 888.8 | 1,362.1 | 823.4 | 623.4 | 1,197.3 | 888.8 | 1,464.2 | 1,592.5 | 1,624.4 | 1,362.1 | ||||||||||||||||||||||||||||||||||
|
Intangible
assets, net
|
106.1 | 243.1 | 602.3 | 111.8 | 81.8 | 73.1 | 243.1 | 240.5 | 256.9 | 255.3 | 602.3 | ||||||||||||||||||||||||||||||||||
|
Accounts
Receivable from Federal Government
|
202.8 | 139.7 | 187.4 | 218.4 | 161.8 | 147.7 | 139.7 | 167.3 | 185.1 | 190.3 | 187.4 | ||||||||||||||||||||||||||||||||||
|
Other
non-current assets
|
306.4 | 362.6 | 534.8 | 345.3 | 322.0 | 536.5 | 362.6 | 491.7 | 580.5 | 635.0 | 534.8 | ||||||||||||||||||||||||||||||||||
|
|
3,406.1 | 3,893.6 | 6,833.0 | 3,716.3 | 2,927.5 | 3,783.5 | 3,893.6 | 5,541.6 | 6,169.2 | 6,442.0 | 6,833.0 | ||||||||||||||||||||||||||||||||||
|
(=)
|
Total
assets
|
5,269.1 | 5,421.1 | 8,994.9 | 5,634.0 | 4,899.0 | 5,484.7 | 5,421.1 | 7,595.1 | 8,708.6 | 8,874.2 | 8,994.9 | |||||||||||||||||||||||||||||||||
|
Liabilities
and shareholders' equity
|
|||||||||||||||||||||||||||||||||||||||||||||
|
Current
liabilities:
|
|||||||||||||||||||||||||||||||||||||||||||||
|
Trade accounts
payable
|
114.4 | 197.2 | 320.0 | 212.0 | 235.8 | 223.7 | 197.2 | 339.8 | 401.3 | 409.3 | 320.0 | ||||||||||||||||||||||||||||||||||
|
Taxes
payable
|
62.9 | 69.0 | 121.2 | 67.4 | 47.4 | 66.1 | 69.0 | 92.9 | 125.1 | 115.4 | 121.2 | ||||||||||||||||||||||||||||||||||
|
Salaries
payable
|
47.8 | 40.2 | 79.5 | 75.8 | 67.5 | 33.5 | 40.2 | 78.0 | 101.7 | 76.4 | 79.5 | ||||||||||||||||||||||||||||||||||
|
Current
portion of long-term debt
|
38.2 | 781.7 | 471.1 | 33.2 | 134.2 | 786.7 | 781.7 | 582.9 | 673.0 | 542.9 | 471.1 | ||||||||||||||||||||||||||||||||||
|
Derivative
financial instruments
|
55.0 | 28.9 | 43.1 | 102.1 | 112.1 | 83.3 | 28.9 | 50.7 | 121.1 | 133.8 | 43.1 | ||||||||||||||||||||||||||||||||||
|
Dividends
payable
|
- | - | 24.7 | - | - | - | - | - | - | - | 24.7 | ||||||||||||||||||||||||||||||||||
|
Deferred
income taxes
|
- | - | - | - | 10.3 | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
|
Other
liabilities
|
40.8 | 47.6 | 112.0 | 29.4 | 28.5 | 30.2 | 47.6 | 87.1 | 70.7 | 111.0 | 112.0 | ||||||||||||||||||||||||||||||||||
|
|
359.1 | 1,164.7 | 1,171.5 | 519.8 | 635.7 | 1,223.6 | 1,164.7 | 1,231.5 | 1,493.0 | 1,388.8 | 1,171.5 | ||||||||||||||||||||||||||||||||||
|
Long-term
liabilities:
|
|||||||||||||||||||||||||||||||||||||||||||||
|
Long-term
debt
|
1,249.3 | 1,251.1 | 2,845.7 | 1,291.4 | 1,257.4 | 1,246.5 | 1,251.1 | 2,249.1 | 2,632.3 | 2,802.2 | 2,845.7 | ||||||||||||||||||||||||||||||||||
|
Estimated
liability for legal proceedings
|
494.1 | 497.6 | 294.6 | 545.0 | 414.1 | 546.4 | 497.6 | 607.5 | 672.6 | 464.8 | 294.6 | ||||||||||||||||||||||||||||||||||
|
Taxes
payable
|
170.4 | 151.5 | 381.8 | 181.9 | 133.4 | 187.1 | 151.5 | 184.7 | 178.3 | 220.6 | 381.8 | ||||||||||||||||||||||||||||||||||
|
Advances from
customers
|
- | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
|
Deferred
income taxes
|
101.8 | 40.4 | 408.8 | 83.6 | - | - | 40.4 | 84.0 | 118.3 | 245.4 | 408.8 | ||||||||||||||||||||||||||||||||||
|
Other
long-term liabilities
|
101.7 | 175.0 | 209.4 | 103.3 | 107.7 | 181.6 | 175.0 | 213.2 | 224.6 | 219.5 | 209.4 | ||||||||||||||||||||||||||||||||||
|
|
2,117.4 | 2,115.6 | 4,140.3 | 2,205.3 | 1,912.7 | 2,161.5 | 2,115.6 | 3,338.5 | 3,826.2 | 3,952.4 | 4,140.3 | ||||||||||||||||||||||||||||||||||
|
Minority
interest in consolidated subsidiaries
|
796.8 | 544.5 | 1,338.9 | 839.7 | 602.8 | 530.7 | 544.5 | 1,037.8 | 1,181.8 | 1,296.7 | 1,338.9 | ||||||||||||||||||||||||||||||||||
|
Shareholders'
equity:
|
|||||||||||||||||||||||||||||||||||||||||||||
|
Common
stock
|
2.3 | 2.7 | 2.7 | 2.3 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | ||||||||||||||||||||||||||||||||||
|
Additional
paid-in capital
|
1,723.1 | 1,926.7 | 1,932.1 | 1,724.6 | 1,920.9 | 1,922.0 | 1,926.7 | 1,964.7 | 1,961.8 | 1,927.3 | 1,932.1 | ||||||||||||||||||||||||||||||||||
|
Accumulated
other comprehensive income
|
171.8 | (243.6 | ) | 167.1 | 273.1 | (130.9 | ) | (246.2 | ) | (243.6 | ) | (13.1 | ) | 146.1 | 188.1 | 167.1 | |||||||||||||||||||||||||||||
|
Retained
earnings (losses)
|
98.5 | (89.6 | ) | 242.3 | 69.2 | (44.9 | ) | (109.5 | ) | (89.6 | ) | 33.0 | 96.9 | 118.3 | 242.3 | ||||||||||||||||||||||||||||||
|
Total
shareholders' equity
|
1,995.7 | 1,596.2 | 2,344.2 | 2,069.1 | 1,747.8 | 1,569.0 | 1,596.2 | 1,987.3 | 2,207.6 | 2,236.3 | 2,344.2 | ||||||||||||||||||||||||||||||||||
|
(=)
Total liabilities and shareholders' equity
|
5,269.1 | 5,421.1 | 8,994.9 | 5,634.0 | 4,899.0 | 5,484.7 | 5,421.1 | 7,595.1 | 8,708.6 | 8,874.2 | 8,994.9 | ||||||||||||||||||||||||||||||||||
30 of
31
|
Cash Flow
Statement
|
Apr'08
|
Mar'09
|
Mar'10
|
Jul'08
|
Oct'08
|
Jan'09
|
Mar'09
|
Jun'09
|
Sep'09
|
Dec'09
|
Mar'10
|
||||||||||||||||||||||||||||||||||
|
(In millions of U.S.
dollars)
|
FY'08
|
FY'09
|
FY'10
|
1Q'09
|
2Q'09
|
3Q'09
|
4Q'09
|
1Q'10
|
2Q'10
|
3Q'10
|
4T'10
|
||||||||||||||||||||||||||||||||||
|
l
|
Cash
flow from operating activities:
|
||||||||||||||||||||||||||||||||||||||||||||
|
Net income
(loss) for the year/quarter
|
16.6 | (188.1 | ) | 331.9 | (29.3 | ) | (114.1 | ) | (64.6 | ) | 19.9 | 122.6 | 63.9 | 21.3 | 124.0 | ||||||||||||||||||||||||||||||
|
Adjustments to
reconcile net income (loss) to cash provided by operating
activities:
|
|||||||||||||||||||||||||||||||||||||||||||||
|
Depreciation
and amortization
|
236.1 | 290.7 | 488.5 | 112.3 | 99.5 | 42.3 | 36.6 | 99.3 | 107.7 | 173.7 | 107.7 | ||||||||||||||||||||||||||||||||||
|
Deferred
income and social contribution taxes
|
(52.4 | ) | (145.3 | ) | 143.3 | (31.6 | ) | (86.7 | ) | 13.9 | (40.9 | ) | 66.6 | 59.3 | 52.3 | (35.0 | ) | ||||||||||||||||||||||||||||
|
Interest,
monetary and exchange variation
|
(43.7 | ) | 497.3 | (131.4 | ) | (14.5 | ) | 327.5 | 2.2 | 182.1 | (136.3 | ) | (67.9 | ) | (57.8 | ) | 130.6 | ||||||||||||||||||||||||||||
|
Minority
interest in net income of subsidiaries
|
(22.0 | ) | (83.0 | ) | 174.0 | (18.6 | ) | (52.0 | ) | (19.3 | ) | 6.9 | 55.8 | 34.0 | 7.3 | 77.0 | |||||||||||||||||||||||||||||
|
Others
|
15.2 | 14.5 | (137.3 | ) | 9.2 | 5.4 | (55.0 | ) | 54.9 | 12.2 | (47.8 | ) | (99.0 | ) | (2.7 | ) | |||||||||||||||||||||||||||||
| 149.8 | 386.1 | 869.0 | 27.5 | 179.7 | (80.5 | ) | 259.5 | 220.3 | 149.3 | 97.8 | 401.6 | ||||||||||||||||||||||||||||||||||
|
Decrease/increase
in operating assets and liabilities:
|
|||||||||||||||||||||||||||||||||||||||||||||
|
Trade accounts
receivable, net
|
(57.1 | ) | (23.7 | ) | 1.4 | 63.9 | (63.7 | ) | 26.5 | (50.5 | ) | 56.5 | (8.5 | ) | 46.9 | (93.6 | ) | ||||||||||||||||||||||||||||
|
Inventories
|
(31.7 | ) | (85.9 | ) | 126.2 | (214.0 | ) | (197.2 | ) | 96.0 | 229.3 | 88.4 | (178.6 | ) | (198.8 | ) | 415.1 | ||||||||||||||||||||||||||||
|
Advances to
suppliers
|
(8.4 | ) | 21.1 | 37.4 | (16.8 | ) | (12.1 | ) | 22.8 | 27.2 | (38.8 | ) | 7.3 | 27.0 | 41.9 | ||||||||||||||||||||||||||||||
|
Trade accounts
payable
|
33.7 | 33.4 | (26.1 | ) | 90.1 | 54.8 | (83.8 | ) | (27.6 | ) | 24.1 | 30.3 | 0.9 | (81.4 | ) | ||||||||||||||||||||||||||||||
|
Derivative
financial instruments
|
90.4 | 4.4 | (111.1 | ) | 11.3 | (4.8 | ) | 56.0 | (58.1 | ) | (16.2 | ) | 57.9 | 25.5 | (178.2 | ) | |||||||||||||||||||||||||||||
|
Taxes
payable
|
(19.6 | ) | (17.1 | ) | 192.5 | (7.9 | ) | (5.0 | ) | (1.2 | ) | (2.9 | ) | (29.3 | ) | (29.7 | ) | (0.6 | ) | 252.1 | |||||||||||||||||||||||||
|
Other assets
and liabilities, net
|
(99.4 | ) | (61.8 | ) | (278.2 | ) | 16.2 | (126.6 | ) | 23.5 | 25.0 | 33.0 | (12.1 | ) | 11.2 | (310.3 | ) | ||||||||||||||||||||||||||||
|
|
(92.2 | ) | (129.6 | ) | (58.1 | ) | (57.1 | ) | (354.6 | ) | 139.8 | 142.4 | 117.7 | (133.3 | ) | (88.0 | ) | 45.6 | |||||||||||||||||||||||||||
|
(=)
Net cash provided by operating actitivities
|
57.6 | 256.6 | 811.0 | (29.6 | ) | (174.9 | ) | 59.2 | 401.9 | 338.0 | 16.0 | 9.8 | 447.2 | ||||||||||||||||||||||||||||||||
|
l
|
Cash
flow from investing activities:
|
||||||||||||||||||||||||||||||||||||||||||||
|
Restricted
cash
|
(25.9 | ) | 29.3 | (18.7 | ) | 0.1 | 37.4 | (8.3 | ) | 0.1 | (14.5 | ) | (63.0 | ) | (14.6 | ) | 73.4 | ||||||||||||||||||||||||||||
|
Marketable
securities
|
(671.0 | ) | 558.8 | - | (202.4 | ) | (123.4 | ) | 791.6 | 93.0 | - | - | - |
#VALOR!
|
|||||||||||||||||||||||||||||||
|
Acquisition of
property, plant and equipment
|
(642.9 | ) | (606.2 | ) | (1,081.5 | ) | (169.3 | ) | (143.9 | ) | (131.7 | ) | (161.2 | ) | (227.0 | ) | (211.5 | ) | (239.6 | ) | (403.4 | ) | |||||||||||||||||||||||
|
Acquisitions,
net of cash acquired
|
(102.0 | ) | (930.4 | ) | (9.0 | ) | 0.8 | (45.2 | ) | (671.5 | ) | (214.5 | ) | (2.1 | ) | 2.1 | (239.7 | ) | 230.7 | ||||||||||||||||||||||||||
|
Other
|
- | 160.7 | 6.0 | - | - | (65.5 | ) | 226.2 | 92.4 | (8.8 | ) | (14.1 | ) | (63.5 | ) | ||||||||||||||||||||||||||||||
|
(=)
Net cash used in investing actitivities
|
(1,441.7 | ) | (787.8 | ) | (1,103.2 | ) | (370.8 | ) | (275.2 | ) | (85.4 | ) | (56.4 | ) | (151.2 | ) | (281.3 | ) | (507.9 | ) |
#VALOR!
|
||||||||||||||||||||||||
|
l
|
Cash
flow from financing activities:
|
||||||||||||||||||||||||||||||||||||||||||||
|
Proceeds from
issuance of common stock
|
1,118.4 | 200.0 | - | - | 196.2 | 0.0 | 3.8 | - | 0.7 | 303.7 | (304.4 | ) | |||||||||||||||||||||||||||||||||
|
Capital
increase on subsidiary from minority
|
324.4 | 11.2 | 57.4 | - | - | - | 11.2 | (62.2 | ) | (0.3 | ) | (1.3 | ) | 121.3 | |||||||||||||||||||||||||||||||
|
Dividends
Paid
|
(44.9 | ) | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
|
Additions of
financial debt
|
117.5 | 789.5 | 2,020.7 | - | 174.5 | 630.4 | (15.4 | ) | 88.6 | 596.8 | 996.1 | 339.2 | |||||||||||||||||||||||||||||||||
|
Payments of
financial debt
|
(492.1 | ) | (111.1 | ) | (1,839.5 | ) | (39.8 | ) | (26.2 | ) | (37.1 | ) | (8.0 | ) | (69.2 | ) | (351.4 | ) | (1,064.4 | ) | (354.5 | ) | |||||||||||||||||||||||
|
Other
|
- | (17.8 | ) | (85.6 | ) | - | - | - | (17.8 | ) | - | - | - | (85.6 | ) | ||||||||||||||||||||||||||||||
|
(=)
Net cash provided by financing actitivities
|
1,023.3 | 871.9 | 153.0 | (39.8 | ) | 344.6 | 593.4 | (26.2 | ) | (42.8 | ) | 245.8 | 234.0 | (284.0 | ) | ||||||||||||||||||||||||||||||
|
Effect of
exchange rate changes on cash and cash
|
112.6 | 99.7 | 195.7 | 458.1 | 81.8 | (529.2 | ) | 89.0 | 23.5 | 170.8 | (46.8 | ) | 48.2 | ||||||||||||||||||||||||||||||||
|
(=)
Variation in cash & equivalents
|
(248.2 | ) | 440.4 | 56.5 | 17.9 | (23.7 | ) | 37.9 | 408.3 | 167.5 | 151.3 | (310.9 | ) |
#VALOR!
|
|||||||||||||||||||||||||||||||
|
(+) Cash and
cash equivalents at beginning of year
|
316.5 | 68.4 | 508.8 | 68.4 | 86.3 | 62.6 | 100.5 | 508.8 | 676.3 | 827.6 | 508.8 | ||||||||||||||||||||||||||||||||||
|
(=)
Cash and cash equivalents at end of year
|
68.4 | 508.8 | 565.2 | 86.3 | 62.6 | 100.5 | 508.8 | 676.3 | 827.6 | 516.7 |
#VALOR!
|
||||||||||||||||||||||||||||||||||
31 of
31
Cosan
S.A. Indústria e Comércio
Consolidated
Financial Statements
as
of March 31, 2010 and 2009 and April 30, 2008
COSAN
S.A. INDÚSTRIA E COMÉRCIO
CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2010 and
2009 and April 30, 2008
TABLE
OF CONTENTS
|
Report of
Independent Registered Public Accounting Firm
|
1
|
|
Consolidated
balance sheets at March 31, 2010 and 2009
|
2
|
|
Consolidated
statements of operations for the year ended March 31, 2010, for the
eleven-month period ended March 31, 2009 and for the year ended April 30,
2008
|
4
|
|
Consolidated
statements of shareholders’ equity and comprehensive income (loss) for the
year ended March 31, 2010, for the eleven-month period ended March 31,
2009 and for the year ended April 30, 2008
|
5
|
|
Consolidated
statements of cash flows for the year ended March 31, 2010, for the
eleven-month period ended March 31, 2009 and for the year ended April 30,
2008
|
6
|
|
Notes to the
consolidated financial statements
|
8
|
Report
of Independent Registered Public Accounting Firm
The Board of
Directors and Shareholders of
Cosan
S.A. Indústria e Comércio
We
have audited the accompanying consolidated balance sheets of Cosan S.A.
Indústria e Comércio and subsidiaries as of March 31, 2010 and 2009, and the
related consolidated statements of operations, shareholders' equity and
comprehensive income (loss), and cash flows for the year ended March 31, 2010,
the eleven-month period ended March 31, 2009, and the year ended April 30, 2008.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. We were not engaged
to perform an audit of the Company’s internal control over financial reporting.
Our audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Cosan
S.A. Indústria e Comércio and subsidiaries as of March 31, 2010 and 2009, and
the consolidated results of their operations and their cash flows for the year
ended March 31, 2010, the eleven-month period ended March 31, 2009, and the year
ended April 30, 2008, in conformity with U.S. generally accepted accounting
principles.
São Paulo, June 10,
2010
ERNST &
YOUNG
Auditores
Independentes S.S.
CRC
2SP015199/O-8
Luiz Carlos
Nannini
Accountant CRC
1SP171638/O-7
1
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Consolidated
balance sheets
March 31, 2010 and
2009
(In thousands of
U.S. dollars, except share data)
|
March
31,
|
March
31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Assets
|
||||||||
|
Current
assets:
|
||||||||
|
Cash and cash
equivalents
|
605,483 | 310,710 | ||||||
|
Restricted
cash
|
25,251 | 5,078 | ||||||
|
Derivative
financial instruments
|
129,456 | 7,352 | ||||||
|
Trade
accounts receivable, less allowances: 2010 – $32,144; 2009 –
$21,241
|
430,328 | 258,863 | ||||||
|
Inventories
|
587,720 | 477,793 | ||||||
|
Advances to
suppliers
|
132,258 | 88,991 | ||||||
|
Recoverable
taxes
|
184,090 | 114,641 | ||||||
|
Other current
assets
|
48,303 | 62,145 | ||||||
| 2,142,889 | 1,325,573 | |||||||
|
Property,
plant, and equipment, net
|
3,997,815 | 2,101,787 | ||||||
|
Goodwill
|
1,289,625 | 803,270 | ||||||
|
Intangible
assets, net
|
600,573 | 241,351 | ||||||
|
Accounts
receivable from federal government
|
187,385 | 139,700 | ||||||
|
Judicial
deposits
|
94,083 | 73,975 | ||||||
|
Other
non-current assets
|
423,447 | 277,028 | ||||||
| 6,592,928 | 3,637,111 | |||||||
|
Total
assets
|
8,735,817 | 4,962,684 | ||||||
2
|
March
31,
|
March
31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Liabilities
and shareholders’ equity
|
||||||||
|
Current
liabilities:
|
||||||||
|
Trade
accounts payable
|
319,707 | 197,009 | ||||||
|
Taxes
payable
|
121,203 | 69,273 | ||||||
|
Salaries
payable
|
79,497 | 40,237 | ||||||
|
Current
portion of long-term debt
|
445,593 | 630,260 | ||||||
|
Derivative
financial instruments
|
43,067 | 28,894 | ||||||
|
Dividends
payable
|
65,451 | - | ||||||
|
Other
liabilities
|
111,971 | 47,946 | ||||||
| 1,186,489 | 1,013,619 | |||||||
|
Long-term
liabilities:
|
||||||||
|
Long-term
debt
|
2,842,953 | 1,246,994 | ||||||
|
Estimated
liability for legal proceedings
|
294,605 | 497,648 | ||||||
|
Taxes
payable
|
381,805 | 149,621 | ||||||
|
Due to Cosan
Limited
|
- | 175,000 | ||||||
|
Deferred
income taxes
|
408,832 | 40,377 | ||||||
|
Other
long-term liabilities
|
154,728 | 116,429 | ||||||
| 4,082,923 | 2,226,069 | |||||||
|
Shareholders’
equity:
|
||||||||
|
Common
stock, no par value. Authorized 406,560,317 shares; issued and outstanding
406,560,317 in 2010 and 328,284,884 shares in
2009
|
2,420,018 | 1,945,741 | ||||||
|
Common
stock warrants
|
- | 25,273 | ||||||
|
Treasury
stock
|
(1,979 | ) | (1,979 | ) | ||||
|
Additional
paid-in capital
|
390,600 | 167,610 | ||||||
|
Accumulated
other comprehensive income (accumulated loss)
|
343,136 | (280,888 | ) | |||||
|
Retained
earnings (losses)
|
281,238 | (146,099 | ) | |||||
|
Equity
attributable to shareholders of Cosan
|
3,433,013 | 1,709,658 | ||||||
|
Equity
attributable to noncontrolling interests
|
33,392 | 13,338 | ||||||
|
Total
shareholders’ equity
|
3,466,405 | 1,722,996 | ||||||
|
Total
liabilities and shareholders' equity
|
8,735,817 | 4,962,684 | ||||||
See accompanying
notes to consolidated financial statements.
3
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Consolidated
statements of operations
Year ended March
31, 2010, eleven-month period ended
March 31, 2009 and
year ended April 30, 2008
(In thousands of
U.S. dollars, except share data)
|
March
31,
|
March
31,
|
April
30,
|
||||||||||
|
2010
|
2009
|
2008
|
||||||||||
|
Net
sales
|
8,283,151 | 2,926,460 | 1,491,233 | |||||||||
|
Cost of goods
sold
|
(7,219,027 | ) | (2,617,877 | ) | (1,344,844 | ) | ||||||
|
Gross
profit
|
1,064,124 | 308,583 | 146,389 | |||||||||
|
Selling
expenses
|
(470,322 | ) | (213,257 | ) | (168,623 | ) | ||||||
|
General and
administrative expenses
|
(268,312 | ) | (136,272 | ) | (113,431 | ) | ||||||
|
Operating
income (loss)
|
325,490 | (40,946 | ) | (135,665 | ) | |||||||
|
Other income
(expenses):
|
||||||||||||
|
Financial
income (expenses), net
|
180,242 | (374,711 | ) | 79,284 | ||||||||
|
Gain on tax
recovery program
|
144,857 | - | - | |||||||||
|
Other
|
34,341 | (2,289 | ) | (3,670 | ) | |||||||
|
Income (loss)
before income taxes and equity in income (loss) of
affiliates
|
684,930 | (417,946 | ) | (60,051 | ) | |||||||
|
Income taxes
benefit (expense)
|
(184,781 | ) | 144,690 | 19,810 | ||||||||
|
Income (loss)
before equity in income (loss) of affiliates
|
500,149 | (273,256 | ) | (40,241 | ) | |||||||
|
Equity in
income (loss) of affiliates
|
(10,254 | ) | 6,128 | (239 | ) | |||||||
|
Net income
(loss)
|
489,895 | (267,128 | ) | (40,480 | ) | |||||||
|
Net (income)
loss attributable to noncontrolling interests
|
2,893 | (4 | ) | 865 | ||||||||
|
Net income
(loss) attributable to Cosan
|
492,788 | (267,132 | ) | (39,615 | ) | |||||||
|
Per-share
amounts attributable to Cosan
|
||||||||||||
|
Net income
(loss)
|
||||||||||||
|
Basic
|
1.31 | (0.89 | ) | (0.18 | ) | |||||||
|
Diluted
|
1.31 | * | * | |||||||||
|
Weighted
average number of shares outstanding
|
||||||||||||
|
Basic
|
375,973,226 | 300,994,991 | 222,620,060 | |||||||||
|
Diluted
|
377,142,643 | * | * | |||||||||
*
Antidilutive
See accompanying
notes to consolidated financial statements.
4
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Consolidated
statements of shareholders’ equity and comprehensive income (loss)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, except share data)
|
Retained
|
Accumulated
|
|||||||||||||||||||||||||||||||||||||||||||
|
Common
stock
|
Treasury
stock
|
Common
stock
|
Additional
|
Earnings
|
other
|
Non
|
Total
|
|||||||||||||||||||||||||||||||||||||
|
Warrants
|
paid-in
|
(accumulated
|
comprehensive
|
controlling
|
shareholders’
|
|||||||||||||||||||||||||||||||||||||||
|
shares
|
amount
|
shares
|
amount
|
number
|
Amount
|
capital
|
loss)
|
Income
(loss)
|
Interest
|
Equity
|
||||||||||||||||||||||||||||||||||
|
Balances
at April 30, 2007
|
188,886,360 | 535,105 | - | - | - | - | 160,944 | 160,648 | 71,953 | 8,512 | 937,162 | |||||||||||||||||||||||||||||||||
|
Issuance of
common shares for cash
|
82,700,000 | 967,198 | - | - | - | - | - | - | - | - | 967,198 | |||||||||||||||||||||||||||||||||
|
Exercise of
stock options
|
961,672 | 10,683 | - | - | - | - | (7,344 | ) | - | - | - | 3,339 | ||||||||||||||||||||||||||||||||
|
Share based
compensation
|
- | - | - | - | - | - | 8,153 | - | - | - | 8,153 | |||||||||||||||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | - | - | (39,615 | ) | - | (865 | ) | (40,480 | ) | ||||||||||||||||||||||||||||||
|
Currency
translation adjustment
|
- | - | - | - | - | - | - | - | 249,868 | 1,584 | 251,452 | |||||||||||||||||||||||||||||||||
|
Comprehensive
income
|
- | - | - | - | - | - | - | - | - | - | 210,972 | |||||||||||||||||||||||||||||||||
|
Balances
at April 30, 2008
|
272,548,032 | 1,512,986 | - | - | - | - | 161,753 | 121,033 | 321,821 | 9,231 | 2,126,824 | |||||||||||||||||||||||||||||||||
|
Issuance of
common shares for cash
|
55,000,000 | 430,810 | - | - | 55,000,000 | 25,273 | - | - | - | 456,083 | ||||||||||||||||||||||||||||||||||
|
Exercise
of stock options
|
736,852 | 1,945 | - | - | - | - | - | - | - | 1,945 | ||||||||||||||||||||||||||||||||||
|
Share based
compensation
|
- | - | - | - | - | - | 5,857 | - | - | 5,857 | ||||||||||||||||||||||||||||||||||
|
Treasury
stock
|
- | - | 343,139 | (1,979 | ) | - | - | - | - | - | (1,979 | ) | ||||||||||||||||||||||||||||||||
|
Issuance of
common shares of Novo Rumo to non-controlling interest
|
- | - | - | - | - | - | - | - | - | 7,670 | 7,670 | |||||||||||||||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | - | - | (267,132 | ) | - | 4 | (267,128 | ) | |||||||||||||||||||||||||||||||
|
Pension
plan
|
- | - | - | - | - | - | - | - | 2,364 | - | 2,364 | |||||||||||||||||||||||||||||||||
|
Currency
translation adjustment
|
- | - | - | - | - | - | - | - | (605,073 | ) | (3,567 | ) | (608,640 | ) | ||||||||||||||||||||||||||||||
|
Total
comprehensive loss
|
(873,404 | ) | ||||||||||||||||||||||||||||||||||||||||||
|
Balances at
March 31, 2009
|
328,284,884 | 1,945,741 | 343,139 | (1,979 | ) | 55,000,000 | 25,273 | 167,610 | (146,099 | ) | (280,888 | ) | 13,338 | 1,722,996 | ||||||||||||||||||||||||||||||
|
Acquisition of
Teaçu
|
- | - | - | - | - | - | 76,427 | - | - | 69,544 | 145,971 | |||||||||||||||||||||||||||||||||
|
Issuance of
common shares in business combination
|
44,300,389 | 169,552 | - | 117,931 | - | - | (62,476 | ) | 225,007 | |||||||||||||||||||||||||||||||||||
|
Exercise of
stock options
|
982,513 | 14,032 | - | - | - | - | (10,693 | ) | - | - | - | 3,339 | ||||||||||||||||||||||||||||||||
|
Exercise of
common stock warrants
|
32,992,531 | 290,693 | - | - | (55,000,000 | ) | (25,273 | ) | 35,725 | - | - | - | 301,145 | |||||||||||||||||||||||||||||||
|
Acquisition of
TEAS
|
- | - | - | - | - | - | - | - | - | 9,075 | 9,075 | |||||||||||||||||||||||||||||||||
|
Dividends
|
- | - | - | - | - | - | - | (65,451 | ) | - | - | (65,451 | ) | |||||||||||||||||||||||||||||||
|
Share based
compensation
|
- | - | - | - | - | - | 3,600 | - | - | - | 3,600 | |||||||||||||||||||||||||||||||||
|
Net
income
|
- | - | - | - | - | - | - | 492,788 | - | (2,893 | ) | 489,895 | ||||||||||||||||||||||||||||||||
|
Pension
Plan
|
- | - | - | - | - | - | - | - | 30,199 | - | 30,199 | |||||||||||||||||||||||||||||||||
|
Currency
translation adjustment
|
- | - | - | - | - | - | - | - | 593,825 | 6,804 | 600,629 | |||||||||||||||||||||||||||||||||
|
Total
comprehensive income
|
1,200,723 | |||||||||||||||||||||||||||||||||||||||||||
|
Balances at
March 31, 2010
|
406,560,317 | 2,420,018 | 343,139 | (1,979 | ) | - | - | 390,600 | 281,238 | 343,136 | 33,392 | 3,466,405 | ||||||||||||||||||||||||||||||||
See accompanying
notes to consolidated financial statements.
5
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Consolidated
statements of cash flows
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars)
|
March
31,
|
March
31,
|
April
30,
|
||||||||||
|
2010
|
2009
|
2008
|
||||||||||
|
Cash flow
from operating activities
|
||||||||||||
|
Net (loss)
income for the period attributable to Cosan
|
492,788 | (267,132 | ) | (39,615 | ) | |||||||
|
Adjustments
to reconcile net income to cash provided by
|
||||||||||||
|
operating
activities:
|
||||||||||||
|
Depreciation
and amortization
|
485,898 | 288,660 | 236,065 | |||||||||
|
Deferred
income taxes
|
143,322 | (145,328 | ) | (52,438 | ) | |||||||
|
Interest,
monetary and exchange variation
|
(134,025 | ) | 497,399 | (43,684 | ) | |||||||
|
Net loss
(income) attributable to noncontrolling interests
|
2,893 | - | (865 | ) | ||||||||
|
Gain on tax
recovery program
|
(144,857 | ) | - | - | ||||||||
|
Others
|
(1,419 | ) | 3,340 | 13,981 | ||||||||
|
Decrease/increase
in operating assets and liabilities
|
||||||||||||
|
Trade
accounts receivable, net
|
1,356 | (23,694 | ) | (57,107 | ) | |||||||
|
Inventories
|
126,164 | (85,891 | ) | (31,739 | ) | |||||||
|
Advances to
suppliers
|
37,362 | 21,091 | (8,363 | ) | ||||||||
|
Recoverable
taxes
|
(20,535 | ) | (32,858 | ) | (44,543 | ) | ||||||
|
Trade
accounts payable
|
(26,117 | ) | 33,426 | 33,702 | ||||||||
|
Derivative
financial instruments
|
(111,077 | ) | 4,365 | 90,383 | ||||||||
|
Taxes
payable
|
192,482 | (17,072 | ) | (19,588 | ) | |||||||
|
Other assets
and liabilities, net
|
(261,717 | ) | (29,566 | ) | (54,901 | ) | ||||||
|
Net cash
provided by operating activities
|
782,518 | 246,740 | 21,288 | |||||||||
|
Cash flows
from investing activities:
|
||||||||||||
|
Restricted
cash
|
(18,650 | ) | 29,312 | (25,886 | ) | |||||||
|
Marketable
securities
|
- | 558,761 | (215,226 | ) | ||||||||
|
Proceeds from
sales of property, plant and equipment
|
5,959 | 160,703 | - | |||||||||
|
Proceeds from
sale of aviation business
|
58,431 | - | - | |||||||||
|
Additions of
property, plant and equipment
|
(1,081,484 | ) | (606,155 | ) | (642,886 | ) | ||||||
|
Acquisitions,
net of cash acquired and other investments
|
(9,007 | ) | (777,713 | ) | (101,961 | ) | ||||||
|
Net cash used
in investing activities
|
(1,044,751 | ) | (635,092 | ) | (985,959 | ) | ||||||
|
Cash flows
from financing activities:
|
||||||||||||
|
Related
parties
|
(279,640 | ) | (15,823 | ) | - | |||||||
|
Proceeds from
issuance of common stock
|
- | 456,083 | 1,032,821 | |||||||||
|
Payments of
dividends
|
- | - | (44,935 | ) | ||||||||
|
Treasury
stock
|
- | (1,979 | ) | - | ||||||||
|
Additions of
long-term debt
|
1,996,229 | 638,390 | 117,533 | |||||||||
|
Increase of
capital in subsidiary by minorities
|
304,427 | 6,641 | - | |||||||||
|
Payments of
long-term debt
|
(1,669,851 | ) | (111,079 | ) | (492,052 | ) | ||||||
|
Net cash
provided by financing activities
|
351,165 | 972,233 | 613,367 | |||||||||
|
Effect
of exchange rate changes on cash and
|
||||||||||||
|
cash
equivalents
|
205,841 | (312,003 | ) | 73,594 | ||||||||
|
Net increase
(decrease) in cash and cash equivalents
|
294,773 | 271,878 | (277,710 | ) | ||||||||
|
Cash and cash
equivalents at beginning of period
|
310,710 | 38,832 | 316,542 | |||||||||
|
Cash and cash
equivalents at end of period
|
605,483 | 310,710 | 38,832 | |||||||||
6
COSAN S.A. INDÚSTRIA E COMÉRCIO
Consolidated
statements of cash flows (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars)
|
2010
|
2009
|
2008
|
||||||||||
|
Supplemental
cash flow information
|
||||||||||||
|
Cash paid
during the period for:
|
||||||||||||
|
Interest
|
208,367 | 74,049 | 124,502 | |||||||||
|
Income
taxes
|
33,403 | 3,855 | 18,787 | |||||||||
|
Non cash
transaction
|
||||||||||||
|
Acquisition
paid with equity
|
435,405 | - | 250,774 | |||||||||
See accompanying
notes to consolidated financial statements.
7
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
1.
|
Operations
|
Cosan S.A.
Indústria e Comércio and subsidiaries (“Cosan” or “the Company”) is incorporated
under the laws of the Federative Republic of Brazil. Cosan shares are traded on
the São Paulo Stock Exchange (Bovespa).
Cosan Limited, a
company incorporated in Bermuda, is the controlling shareholder of Cosan,
holding a 62.27% interest therein as of March 31, 2010 (68.89% as of March 31,
2009). The change in interest was principally related to the issuance of shares
for the acquisition of Curupay S.A. Participações (Note 8) and exercise of
common stock warrants (Note 17). The class “A” common shares of Cosan Limited
are traded on the New York Stock Exchange (NYSE) and Bovespa.
The companies
included in the consolidated financial statements have as their primary activity
the production of ethanol and sugar, the marketing and distribution of fuel and
lubricants in Brazil, and logistics services in the state of São Paulo,
Brazil.
On
April 23, 2008, the Company entered into an agreement with ExxonMobil
International Holding B.V., or “Exxon”, for the acquisition of 100% of the
outstanding shares of Esso Brasileira de Petróleo Ltda. and its subsidiaries
(“Essobrás”), a distributor and seller of fuels and producer and seller of
lubricants and specialty petroleum products of ExxonMobil in Brazil. On December
1, 2008 the Company completed the acquisition (see further discussion regarding this acquisition at Note 8).
On January 16, 2009 the Company changed the corporate name of Essobrás to
Cosan Combustíveis e Lubrificantes S.A. (“Cosan CL”).
On
August 29, 2008 the Company held an Annual and Special General Shareholders
Meeting and unanimously approved the modification of the end of its fiscal year
from April 30 to March 31 of each year. Therefore the consolidated statements of
operations and cash flows presented in these financial statements lack
comparison to the eleven month period ended March 31, 2009.
8
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
1.
|
Operations
(Continued)
|
On
August 28, 2008, the Company announced the incorporation of a new affiliate
named Radar Propriedades Agrícolas S.A. (“Radar”), which engages in farm real
estate investments in Brazil. The initial capital contribution was US$185,000,
of which US$35,000 was invested by Cosan (18.92%) and US$150,000 by another
shareholder (81.08%). On August 25, 2009, an additional capital contribution of
US$33,262 was approved, of which US$6,293 (18.92%) was invested by Cosan and the
remainder by the other shareholder. On December 15, 2009, an additional capital
contribution of US$8,944, was approved, of which US$1,692 (18.92%) was invested
by Cosan and the remainder by the other shareholder.
On
April 9, 2009, the Company entered into an agreement with Rezende Barbosa S.A.
Administração e Participações (“Rezende Barbosa”) to acquire 100% of the
outstanding shares of Teaçu Armazéns Gerais S.A. (“Teaçu”). Teaçu operates a
port terminal concession in the city of Santos. In connection with this
acquisition the Company concentrated its port concessions in the subsidiary Rumo
Logística S.A. See further discussion regarding
this acquisition at Note 8.
On
June 17, 2009, Cosanpar Participações S.A. (“Cosanpar”), a wholly-owned
subsidiary of Cosan sold its aviation fuel business that was acquired in the
Essobrás acquisition, to Shell Brasil Ltda. for US$58,431 cash. The results of
operations of this business were recorded in the fuel distribution and
lubricants segment. The carrying value of the net assets sold was US$40,084,
which resulted in a gain of US$19,150.
On
June 18, 2009, the Company entered into an agreement with Rezende Barbosa to
acquire 100% of the outstanding shares of Curupay S.A. Participações
(“Curupay”). The principal investment of Curupay was 100% of the
outstanding shares of Cosan Alimentos S.A. (former Nova América S.A.
Agroenergia). Cosan Alimentos S.A. (“Cosan Alimentos”) is a producer of sugar,
ethanol and energy co-generation which also operates in trading and logistics.
See further discussion regarding this acquisition
at Note 8.
9
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
1.
|
Operations
(Continued)
|
On
November 24, 2009, the Company entered into an agreement with Crystalsev
Comércio e Representação Ltda and Plínio Nastari Consultoria e Participações
Ltda to acquire 26,7% of the outstanding shares of TEAS Terminal Exportador de
Álcool de Santos S.A. (“TEAS”). As a result, this increased its ownership
percentage from 40.0% to 66.7% of the TEAS’s capital. TEAS operates a port
terminal concession in the city of Santos. See further discussion regarding this acquisition at Note
8.
On
November 12, 2009, the Company, through its subsidiary Rumo Logística S.A.,
acquired a 14.28% interest in Logispot, represented by 166,590 common shares,
for $11,606 cash. Logispot is a logistics hub and warehouse based in the city of
Sumaré.
On
February 1, 2010, the Company announced that it, along with Royal Dutch Shell,
had reached a non-binding memorandum of understanding, to expire in 180 days, to
form a joint venture for a combined 50/50 investment. Cosan will contribute its
sugar and ethanol and its distribution assets to the joint venture while Shell
will contribute its distribution assets in Brazil. Shell will also make a fixed
cash contribution in the amount of US$1,625 billion over a 2 year period. The
closing of this transaction is dependent upon the conclusion of the
negotiations.
10
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
2.
|
Presentation
of the consolidated financial
statements
|
Basis
of presentation
The consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles in the United States (“U.S. GAAP”), which differs in
certain respects from accounting principles generally accepted in Brazil
(“Brazilian GAAP”), which Cosan uses to prepare its statutory consolidated
financial statements as filed with the Brazilian Securities Commission - CVM
(“Comissão de Valores Mobiliários”).
The Brazilian real
is the currency of the primary economic environment in which Cosan and its
subsidiaries located in Brazil operate, generate and expend cash and is the
functional currency, except for the foreign subsidiaries in which U.S. dollar is
their functional currency. Cosan utilizes the U.S. dollar as its reporting
currency. The accounts of Cosan are maintained in Brazilian reais, which have
been translated into U.S. dollars in accordance with Accounting Standards
Codification (“ASC”) 830, “Foreign Currency Matters”.
The assets and liabilities are translated from reais to U.S. dollars using the
official exchange rates reported by the Brazilian Central Bank at the balance
sheet date and revenues, expenses, gains and losses are translated using the
average exchange rates for the period. The translation gain or loss is included
in the accumulated other comprehensive income (loss) component of shareholders’
equity, and in the statement of comprehensive income (loss) for the period in
accordance with the criteria established in ASC 220, “Comprehensive
Income”.
The exchange rate
of the Brazilian real (R$) to the US$ was R$1.7810=US$1.00 at March 31, 2010,
R$2.3152=US$1.00 at March 31, 2009 and R$1.6872=US$1.00 at April 30,
2008.
11
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant
accounting polices
|
|
a.
|
Principles
of consolidation
|
The consolidated
financial statements include the accounts and operations of Cosan and its
subsidiaries. All significant intercompany accounts and transactions are
eliminated upon consolidation.
The following
subsidiaries were included in the consolidated financial statements for the year
ended March 31, 2010, eleven-month period ended March 31, 2009 and the year
ended April 30, 2008.
|
Ownership
% direct and indirect
|
|||||||
|
2010
|
2009
|
2008
|
|||||
|
Administração
de Participações Aguassanta Ltda.
|
91.5%
|
91.5%
|
91.5%
|
||||
|
Cosan S.A.
Açúcar e Álcool (1)
|
99.6%
|
99.6%
|
89.9%
|
||||
|
Águas da
Ponta Alta S.A.
|
99.6%
|
99.6%
|
-
|
||||
|
Vale da Ponte
Alta S.A.
|
99,6%
|
99.6%
|
-
|
||||
|
Agrícola
Ponte Alta S.A.
|
99.6%
|
99.6%
|
99,1%
|
||||
|
Cosan
Centroeste S.A. Açúcar e Álcool
|
99.6%
|
99.6%
|
99,1%
|
||||
|
Barra S.A.
Bioenergia
|
99.6%
|
99.6%
|
99,1%
|
||||
|
DaBarra
Alimentos Ltda.
|
99.6%
|
99.6%
|
99,1%
|
||||
|
Bonfim Nova
Tamoio – BNT Agrícola Ltda.
|
99.6%
|
99.6%
|
99,1%
|
||||
|
Benálcool
S.A. Açúcar e Álcool
|
99.6%
|
99.6%
|
99,1%
|
||||
|
Barrapar
Participações S.A.
|
99.6%
|
99.6%
|
-
|
||||
|
Aliança
Indústria e Comércio de Açúcar e Álcool S.A.
|
99.6%
|
99.6%
|
-
|
||||
|
Cosan
Distribuidora de Combustíveis Ltda.
|
99.9%
|
100.0%
|
99.9%
|
||||
|
Cosan S.A.
Bioenergia
|
100.0%
|
100.0%
|
100.0%
|
||||
|
Cosan
International Universal Corporation
|
100.0%
|
100.0%
|
100.0%
|
||||
|
Cosan Finance
Limited
|
100.0%
|
100.0%
|
100.0%
|
||||
|
Grançucar
S.A. Refinadora de Açúcar
|
100.0%
|
100.0%
|
100.0%
|
||||
|
Cosanpar
Participações S.A. (2)
|
-
|
100.0%
|
-
|
||||
|
Cosan
Combustíveis e Lubrificantes S.A.
|
100.0%
|
-
|
-
|
||||
|
Copsapar
Participações S.A.
|
90.0%
|
90.0%
|
-
|
||||
|
Novo Rumo
Logística S.A.
|
92.9%
|
-
|
-
|
||||
|
Rumo
Logística S.A.
|
92.9%
|
-
|
-
|
||||
|
Cosan
Operadora Portuária S.A.
|
92,9%
|
92,9%
|
-
|
||||
|
Teaçú
Armazéns Gerais S.A.
|
92.9%
|
-
|
-
|
||||
|
Teas Terminal
Exportador de Álcool de Santos S.A. (3)
|
66.7%
|
32,0%
|
-
|
||||
|
Cosan
Alimentos S.A. (formerly known as Nova América S.A. –
Agroenergia)
|
100.0%
|
-
|
-
|
||||
|
Pasadena
Empreendimentos e Participações S.A. (4)
|
-
|
-
|
-
|
||||
|
(1)
|
Usina da
Barra S/A Açúcar e Álcool was renamed as Cosan S/A Açucar e
Alcool;
|
|
(2)
|
In June 23,
2009, Cosan CL incorporated the Cosanpar Participações
S/A.;
|
|
(3)
|
Increase of
stockholding with acquisition of control (see Note 8);
and
|
|
(4)
|
Immaterial
special purpose entity controlled by the
Company.
|
12
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting
polices (Continued)
|
|
|
b.
|
Revenue
recognition
|
Cosan recognizes
revenue when title passes to the customer. This is date of shipment when shipped
FOB shipping point and date of receipt by customer for certain export sales,
which are shipped FOB destination. Selling prices are fixed based on purchase
orders or contractual arrangements. Revenue for fuel distribution is recognized
when products are delivered to the service station or customer. Provision is
made for estimated returns.
Shipping and
handling costs are classified as selling expenses in the consolidated statement
of operations. The shipping and handling costs as of March 31, 2010 amounted to
US$179,956 (US$162,927 as of March 31, 2009 and US$165,016 as of April 30,
2008).
Sales incentives on
fuel distribution are volume-based incentives and are recognized as a reduction
of revenue.
Sales revenue
includes taxes collected from customers in the amount of US$420,780 as of March
31, 2010 (US$219,933 as of March 31, 2009 and US$125,848 as of April 30,
2008).
|
|
c.
|
Advertising
and sales promotion costs
|
Advertising and
sales promotion costs: are recognized when incurred and amounted to US$25,027 as
of March 31, 2010 (US$4,079 as of March 31, 2009 and US$1,284 as of April 30,
2008).
|
|
d.
|
Use
of estimates
|
The preparation of
consolidated financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual
results could differ from these estimates. These estimates and assumptions are
reviewed and updated regularly to reflect recent experience.
13
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting
polices (Continued)
|
|
|
e.
|
Cash
and cash equivalents
|
Cosan considers all
highly liquid investments with a maturity of three months or less when purchased
to be cash equivalents. Excess cash and cash equivalents are invested in
short-term, highly liquid money market funds.
|
|
f.
|
Restricted
cash
|
The restricted cash
amounts are related to deposits of margin requirements with commodities brokers
that trade Cosan’s derivative instruments.
|
|
g.
|
Trade
accounts receivable and allowance for doubtful
accounts
|
Trade accounts
receivable are recorded at estimated net realizable value and do not bear
interest. The allowance for doubtful accounts is recorded at an amount
considered sufficient to cover estimated losses arising on collection of
accounts receivable.
|
|
h.
|
Inventories
|
Inventories are
valued at the lower of cost or market through average cost of production or
acquisition. Cost for finished goods and work-in-progress includes purchased raw
materials, labor, maintenance costs of growing crops, depreciation of major
maintenance costs and manufacturing and production overhead, which are related
to the purchase and production of inventories.
During the
development period of growing crops, costs are recorded in property, plant and
equipment. After the development period, annual maintenance costs of growing
crops become a portion of the cost of the current-year crop, along with
harvesting costs, depreciation of the plants, and allocated overhead costs.
Annual maintenance costs include cultivation, spraying, pruning, and
fertilizing. The annual maintenance costs are allocated to cost of production
based on the amount of sugarcane milled during the harvest period.
Cosan’s harvest
period begins between the months of March and April each year and ceases
normally in the months of November and December. From January to April Cosan
performs its major maintenance activities, as described at item j
below.
14
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting
polices (Continued)
|
|
|
i.
|
Investment
in affiliated companies
|
Investments in
affiliates in which Cosan exercises significant influence over the operating and
financial policies are accounted for using the equity method.
|
|
j.
|
Property,
plant and equipment
|
Property, plant and
equipment are recorded at cost of acquisition, formation or construction,
including interest incurred on financing. During the period of construction,
costs include land preparation, plants, preparation of planting beds, stakes and
wires, cultural care during the development period, and overhead. Amortization
of sugarcane plants is calculated using the straight-line method at a rate of
20% per annum as Cosan harvests these plants during a five-year average
period.
Depreciation is
calculated using the straight-line method at rates that take into account the
estimated useful life of the assets: 25 years for buildings; 10 years for
machinery and equipment; 7 years for furniture, fixtures and computer equipment;
5 years for vehicles; 25 years for leasehold improvements; and 5 years for
sugarcane plant development costs.
Cosan performs
planned major maintenance activities in its industrial facilities on an annual
basis. This generally occurs during the months from January to March, with the
purpose to inspect and replace components. The annual major maintenance costs
include labor, material, outside services, and general or overhead expense
allocations during the inter-harvest period. Cosan utilizes the built-in
overhaul method to account for the annual costs of major maintenance activities.
Thus the estimated cost of the portion of the total cost of a fixed asset which
must be replaced on an annual basis is recorded as a separate component of the
cost of fixed assets and depreciated over its separate estimated useful
life. It is then replaced in connection with the annual major
maintenance activities. Costs of normal periodic maintenance are charged to
expense as incurred since the parts replaced do not enhance or maintain the
crushing capacity or provide betterments to the fixed assets.
15
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting
polices (Continued)
|
|
|
j.
|
Property,
plant and equipment (Continued)
|
Impairment of
long-lived assets is recognized when events or changes in circumstances indicate
that the carrying amount of an asset or group of assets may not be recoverable.
If the expected future undiscounted cash flows are less than the carrying amount
of the asset, an impairment loss is recognized at that time to reduce the asset
to the lower of its fair value or its net book value.
|
|
k.
|
Asset
retirement obligations
|
Retirement of
long-lived assets is accounted for in accordance with ASC 410,“Accounting for Asset Retirement
Obligations”. The retirement obligations of the subsidiary Cosan CL
relate to the legally required obligation to remove underground fuel tanks upon
retirement, the initial measurement of which is recognized as a liability
discounted to present values and subsequently accreted through
earnings. An asset retirement cost equal to the initial estimated liability is
capitalized as part of the related asset’s carrying value and depreciated over
the asset’s useful life.
|
l.
|
Goodwill
and other intangible assets
|
Cosan tests
goodwill and indefinite-lived intangible assets for impairment annually during
the fourth quarter after the annual forecasting process is completed.
Furthermore, goodwill is reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value may not be
recoverable.
|
m.
|
Environmental
matters
|
Cosan’s production
facilities and its plantation activities are both subject to environmental
regulations. Cosan diminishes the risks associated with environmental matters,
through operating procedures and controls and investments in pollution control
equipment and systems. Cosan believes that no provision for losses related to
environmental matters is currently required, based on existing Brazilian laws
and regulations.
16
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting
polices (Continued)
|
|
|
n.
|
Estimated
liability for legal proceedings and labor
claims
|
Determination of
the estimated liability for legal proceedings and labor claims involves
considerable judgment on the part of management. In accordance with ASC 450,
“Accounting for
Contingencies”, a contingency is an existing condition, situation, or set
of circumstances involving uncertainty as to possible gain or loss to an
enterprise that will ultimately be resolved when one or more future events occur
or fail to occur. Cosan is subject to various claims, legal, civil and labor
proceedings covering a wide range of matters that arise in the ordinary course
of business activities. Cosan accrues such liabilities when it determines that
losses are probable and can be reasonably estimated. The balances are adjusted
to account for changes in circumstances in ongoing issues and the establishment
of additional reserves for emerging issues. Actual results could differ from
estimates.
|
|
o.
|
Income
taxes
|
Deferred income
taxes are recognized for the differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carryforwards.
In
accordance with ASC 740, “Accounting for Uncertainty in Income
Taxes”, the Company recognizes the effect of income tax positions only if
those positions are more likely than not of being sustained. Recognized income
tax positions are measured at the largest amount that is greater than a 50%
likelihood of being realized. Changes in recognition or measurement are
reflected in the period in which the change in estimate occurs.
The Company records
interest related to unrecognized tax benefits in interest expense and penalties
in financial expenses.
Valuation
allowances are established when management determines that it is more likely
than not that the deferred tax assets will not be realized.
17
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting
polices (Continued)
|
|
|
p.
|
Earnings
(losses) per share
|
Earnings (losses)
per share are computed by dividing net income by the weighted average number of
common shares outstanding during the year. Diluted earnings per share are
calculated by adjusting average outstanding shares for the impact of conversion
of all potentially dilutive options.
|
|
q.
|
Share-based
compensation
|
Cosan’s share based
compensation plan, which was adopted on August 30, 2005, is accounted for in
accordance with ASC 718, “Share-Based Payments”, which
requires it to recognize expense related to the fair value of its share-based
compensation awards. Compensation expense for all share-based compensation
awards granted was based on the grant-date fair value estimated in accordance
with the provisions of ASC 718 and the expense has been recognized for share
based awards on a straight-line basis over the requisite service period of the
award. For purpose of estimating the fair value of options on their date of
grant, Cosan uses a binomial model.
|
|
r.
|
Derivative
financial instruments
|
Cosan accounts for
derivative financial instruments utilizing ASC 815, “Accounting for Derivative
Instruments and Hedging Activities”, as amended. As part of Cosan’s risk
management program, it uses a variety of financial instruments, including
commodity futures contracts, forward currency agreements, interest rate and
foreign exchange swap contracts and option contracts. Cosan recognizes all
derivative instruments as non-hedge transactions. The derivative
instruments are measured at fair value and the gains or losses resulting from
the changes in fair value of the instruments are recorded in financial income or
financial expense.
18
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting
polices (Continued)
|
|
s.
|
Fair
Value Measurements
|
On
May 1, 2008, Cosan adopted the provisions of ASC 820, “Fair Value Measurements and
Disclosures”, for fair value measurements of financial assets and
financial liabilities and for fair value measurements of non-financial assets
and liabilities that are recognized or disclosed at fair value in the financial
statements on a recurring basis. ASC 820 defines fair value as the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. ASC 820 also
establishes a framework for measuring fair value and expands disclosures about
fair value measurements.
|
|
t.
|
Recently
adopted accounting standards
|
FASB Accounting Standards
Codification
In
September 2009, the Accounting Standards Codification (“ASC”) became the
source of authoritative U.S. GAAP recognized by the Financial Accounting
Standards Board (“FASB”) for nongovernmental entities, except for certain FASB
Statements not yet incorporated into ASC. Rules and interpretive releases of the
SEC under federal securities laws are also sources of authoritative U.S. GAAP
for registrants. The authoritative guidance mentioned in these financial
statements includes the applicable ASC reference.
Subsequent
Events
The Company adopted
ASC 855, “Subsequent
Events”, which established general accounting standards and disclosure
for subsequent events, during the year ended March 31, 2010.
19
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting
polices (Continued)
|
Noncontrolling
Interests
Effective
April 1, 2009, the Company adopted new accounting guidance ASC 810, “Consolidation”, which changed
the accounting for and the reporting of an entity’s minority
ownership. Such minority ownership, previously referred to as
minority interest, is now referred to as noncontrolling interests. The
adoption of this guidance resulted in the reclassification of amounts previously
attributable to minority interest and classified in the mezzanine outside of
shareholders’ equity, to a separate component of shareholders’ equity titled
“Noncontrolling Interests” in the consolidated balance sheets and statement of
changes in shareholders’ equity and comprehensive income
(loss).
Additionally, net
income and comprehensive income attributable to noncontrolling interests are
shown separately from consolidated net income and comprehensive income in the
consolidated statements of operations and statements of changes in shareholders’
equity and comprehensive income (loss). Prior period financial statements have
been reclassified to conform to the current year presentation as required by ASC
810.
|
u.
|
New
Accounting Pronouncements
|
In
January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value
Measurements, which will require companies to make new disclosures about
recurring or nonrecurring fair value measurements including significant
transfers into and out of Level 1 and Level 2 fair value hierarchies
and information on purchases, sales, issuance and settlements on a gross basis
in the reconciliation of Level 3 fair value measurements. The ASU is
effective prospectively for financial statements issued for fiscal years and
interim periods beginning after December 15, 2009. The new disclosures
about purchases, sales, issuance and settlements on a gross basis in the
reconciliation of Level 3 fair value measurements is effective for interim
and annual reporting periods beginning after December 15, 2010. The Company
expects that the adoption of ASU 2010-06 will not have a material impact on its
consolidated financial statements.
20
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting
polices (Continued)
|
In
June 2009, the FASB issued Statement of Financial Accounting Standards
No. 167, Amendments to
Financial Accounting Standards Board Interpretation No. 46(R),
included in ASC Subtopic 810-10, Consolidations — Overall.
This guidance is intended to improve financial reporting by enterprises
involved with variable interest entities by requiring ongoing reassessments of
whether an enterprise is the primary beneficiary of a variable interest entity
and addresses concerns regarding the timely and usefulness of information about
an enterprise’s involvement in a variable interest entity. This guidance is
effective for interim and annual reporting periods beginning after
November 15, 2009, with early application prohibited. The Company does not
believe the adoption will have a material impact on its consolidated financial
statements.
|
4.
|
Cash
and cash equivalents
|
|
2010
|
2009
|
|||||||
|
Local
currency
|
||||||||
|
Cash and bank
accounts
|
41,321 | 61,268 | ||||||
|
Highly liquid
investments
|
492,430 | 228,291 | ||||||
|
Foreign
currency
|
||||||||
|
Bank
accounts
|
71,732 | 21,151 | ||||||
| 605,483 | 310,710 | |||||||
|
5.
|
Derivative
financial instruments
|
Cosan uses
derivative financial instruments to manage its exposure related to sugar price
variations in the international market, interest rate and exchange rate
variation. The instruments are commodity futures contracts, forward currency
agreements, interest rate and foreign exchange swap contracts, and option
contracts. Cosan recognizes all derivatives on the balance sheet at fair value
through profit or loss.
Cosan does not have
any derivatives that are designated as hedging instruments as of March 31,
2010.
21
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
5.
|
Derivative financial
instruments (Continued)
|
The following table
summarizes the notional value of derivative financial instruments as well as the
related amounts recorded in balance sheet accounts:
|
Balance
sheet location
|
Notional
amounts
|
Carrying
value asset (liability)
|
|||||||||||||||
|
Derivative
Financial Instruments
|
March
31, 2010
|
March
31, 2009
|
March
31, 2010
|
March
31, 2009
|
|||||||||||||
|
Commodities
derivatives
|
|||||||||||||||||
|
Future
contracts:
|
|||||||||||||||||
|
Purchase
commitments - sugar
|
Current
assets (liabilities)
|
102,725 | 61 | (19,128 | ) | (4 | ) | ||||||||||
|
Sell
commitments
|
Current
assets
|
558,385 | 182,943 | 82,229 | 4,163 | ||||||||||||
|
Swap
agreements
|
Current
assets
|
56,594 | - | 607 | - | ||||||||||||
|
Options:
|
|||||||||||||||||
|
Purchased
|
Current
assets
|
145,517 | - | 12,777 | - | ||||||||||||
|
Written
|
Current
assets (liabilities)
|
457,841 | 64,366 | (19,362 | ) | (2,906 | ) | ||||||||||
|
Foreign
exchange and interest rate derivatives
|
|||||||||||||||||
|
Forward
contracts:
|
|||||||||||||||||
|
Sale
commitments
|
Current
assets (liabilities)
|
573,250 | 184,653 | 4,490 | (23,035 | ) | |||||||||||
|
Purchase
commitments
|
Current
assets (liabilities)
|
571,500 | - | (4,226 | ) | - | |||||||||||
|
Swap
agreements:
|
|||||||||||||||||
|
Senior
notes
|
Current
(liabilities)
|
- | 246,501 | - | (2,949 | ) | |||||||||||
|
Interest
Libor
|
Current assets (liabilities) | 300,000 | - | (351 | ) | - | |||||||||||
|
Future
contracts
|
|||||||||||||||||
|
Sale
commitments
|
Current
assets
|
487,800 | 372,230 | 20,527 | 3,189 | ||||||||||||
|
Options
|
|||||||||||||||||
|
Purchased
|
Current
assets
|
372,568 | - | 8,826 | - | ||||||||||||
|
Total
assets
|
129,456 | 7,352 | |||||||||||||||
|
Total
liabilities
|
(43,067 | ) | (28,894 | ) | |||||||||||||
|
6.
|
Inventories
|
|
2010
|
2009
|
|||||||
|
Finished
goods:
|
||||||||
|
Sugar
|
52,561 | 47,195 | ||||||
|
Ethanol
|
31,573 | 86,809 | ||||||
|
Lubricants
and Fuel (Gasoline, Diesel and Ethanol)
|
149,613 | 120,108 | ||||||
| 233,747 | 254,112 | |||||||
|
Annual
maintenance cost of growing crops
|
243,709 | 167,576 | ||||||
|
Others
|
110,264 | 56,104 | ||||||
| 587,720 | 477,792 | |||||||
22
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
7.
|
Property,
plant and equipment, net
|
|
2010
|
2009
|
|||||||
|
Land and
rural properties
|
427,454 | 321,902 | ||||||
|
Machinery,
equipment and installations
|
2,683,191 | 1,217,512 | ||||||
|
Vehicles
|
168,875 | 123,867 | ||||||
|
Furniture,
fixtures and computer equipment
|
71,254 | 44,600 | ||||||
|
Buildings
|
569,255 | 218,866 | ||||||
|
Construction
in progress
|
811,395 | 395,200 | ||||||
|
Sugarcane
plant development costs
|
807,757 | 655,306 | ||||||
|
Leasehold
improvements and others
|
264,693 | 153,432 | ||||||
| 5,803,874 | 3,122,429 | |||||||
|
Accumulated
depreciation and amortization
|
(1,806,059 | ) | (1,028,898 | ) | ||||
|
Total
|
3,997,815 | 2,101,787 | ||||||
|
8.
|
Acquisitions
|
a. Teaçu Armazéns Gerais
S.A.
On
April 9, 2009, Cosan S.A. Indústria e Comércio, through its 90% owned
subsidiary, Copsapar Participações S.A., which owns 100% of Novo Rumo Logística
S.A. (“Novo Rumo”), acquired 100% of the outstanding shares of Teaçu Armazéns
Gerais S.A. (“Teaçu”) from Rezende Barbosa S.A. Administração e Participações
(“Rezende Barbosa”) for $52,985 cash and issuance of 90,736,131 shares of Novo
Rumo, equivalent to 28.82% of its share capital. Teaçu holds a port concession
in the city of Santos and operates a terminal dedicated to exporting sugar and
other agricultural products. This acquisition combines the Santos port
operations previously held separately by Cosan S.A. and Teaçu.
As
a result of this transaction, Cosan S.A. reduced its indirect share ownership in
Novo Rumo to 64.06%.
The
acquisition-date fair value of the consideration transferred totaled $167,303
which consisted of the following:
|
Cash
|
52,985 | |||
|
Common stock
at fair value
|
114,318 | |||
|
Total
consideration transferred
|
167,303 |
23
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
a. Teaçu Armazéns Gerais
S.A.
(Continued)
In
the absence of a quoted market price, the fair value of common stock included in
the consideration transferred was calculated using an income approach using the
present value of estimated future net cash flows.
The following table
summarizes the estimated fair values of the assets acquired and liabilities
assumed at the acquisition date. The Company has finalized the allocation of the
consideration transferred as of March 31, 2010.
|
Description
|
||||
|
Property,
plant and equipment
|
44,417 | |||
|
Intangible
assets
|
138,424 | |||
|
Inventories
|
1,209 | |||
|
Other
assets
|
26,566 | |||
|
Long-term
debt including current installments
|
(18,933 | ) | ||
|
Trade
accounts payable
|
(485 | ) | ||
|
Estimated
liability for legal proceedings and labor claims
|
(3,289 | ) | ||
|
Deferred
income taxes
|
(45,523 | ) | ||
|
Other
liabilities
|
(3,117 | ) | ||
|
Net assets
acquired
|
139,269 | |||
|
Consideration
transferred, net of cash acquired
|
167,008 | |||
|
Goodwill
|
27,739 | |||
The goodwill of
$27,739 arising from the acquisition, which will be substantially deductible for
tax purposes and consists largely of the synergies and economies of scale
expected from combining the port operations of Cosan S.A. and Teaçu. The
goodwill was assigned to the Sugar Logistics operating segment.
24
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
a. Teaçu Armazéns Gerais
S.A. (Continued)
The purchase price
to acquire Teaçu was allocated based on the fair value of the assets acquired
and liabilities assumed. The Company obtained an independent valuation of its
property, plant and equipment, intangible assets, long-term debt, and internally
determined the fair value of its other assets and liabilities. The initial
purchase price allocation has been adjusted primarily as a result of refinements
in the Company’s assumptions relating to property, plant and equipment,
intangible assets and other assets and liabilities. These adjustments have
resulted in a change in the determination of the amounts of deferred taxes upon
the completion of the valuation. As a result of these changes, goodwill, as
previously disclosed, has been changed as follows:
|
Provisional
goodwill
|
102,052 | |||
|
Intangible
assets – port concession granted by the government
|
(138,424 | ) | ||
|
Adjustments
of fair value of PP&E
|
(4,193 | ) | ||
|
Adjustments
of fair value of other assets and liabilities
|
4,051 | |||
|
Deferred
income tax
|
47,467 | |||
|
Change in
consideration transferred of common stock at fair value
|
16,786 | |||
|
Goodwill
|
27,739 |
b. Curupay S.A.
Participações
On
June 18, 2009, Cosan S.A. acquired 100% of the outstanding shares of Curupay
S.A. Participações from Rezende Barbosa, through the issuance of 44,300,389
common shares valued at $7.25 per share (fair value at the acquisition date) and
a total consideration transferred of US$321,087. The assets acquired
include the non-controlling interest in Novo Rumo representing 28.82% of its
outstanding shares which were issued in the Teaçu acquisition, and 100% of the
outstanding shares of two operating companies, Nova América S.A. Trading and
Cosan Alimentos (collectively referred to as “Nova América”). Nova América is a
producer of sugar, ethanol and energy co-generation and also operates in trading
and logistics.
With the
acquisition of the noncontrolling interest of Novo Rumo, Cosan S.A. increased
its share ownership in Novo Rumo to 92.88%. This transaction was a change in
ownership interest without a loss of control and accounted for as a transaction
in shareholders’ equity.
25
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
b. Curupay S.A.
Participações (Continued)
The following table
summarizes the assets acquired and liabilities assumed in relation to Nova
América. These amounts are final as valuations of intangible assets, fixed
assets and other assets and liabilities were concluded as of March 31,
2010.
|
Description
|
||||
|
Property,
plant and equipment
|
455,651 | |||
|
Intangible
assets
|
125,491 | |||
|
Noncontrolling
interest in Novo Rumo
|
68,180 | |||
|
Inventories
|
61,323 | |||
|
Account
receivables
|
62,215 | |||
|
Recoverable
taxes
|
12,527 | |||
|
Related
parties
|
34,846 | |||
|
Other
assets
|
100,555 | |||
|
Long-term
debt including current installments
|
(604,234 | ) | ||
|
Trade
accounts payable
|
(80,936 | ) | ||
|
Estimated
liability for legal proceedings and labor claims
|
(10,461 | ) | ||
|
Taxes and
contributions payable
|
(28,821 | ) | ||
|
Deferred
income taxes
|
(24,359 | ) | ||
|
Other
liabilities
|
(64,802 | ) | ||
|
Net assets
acquired
|
107,175 | |||
|
Consideration
transferred, net of cash acquired
|
294,605 | |||
|
Goodwill
|
187,430 | |||
The goodwill of
US$187,430 arising from the acquisition was assigned to the Ssugar and Ethanol
operating segment.
26
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
b. Curupay S.A.
Participações (Continued)
The purchase price
to acquire Curupay was allocated based on the fair value of the assets acquired
and liabilities assumed. The Company obtained an independent valuation of its
property, plant and equipment, intangible assets, long-term debt, and internally
determined the fair value of its other assets and liabilities. The initial
purchase price allocation has been adjusted primarily as a result of refinements
in the Company’s assumptions relating to property, plant and equipment,
intangible assets and other assets and liabilities. These adjustments have
resulted in a change in the determination of the amounts of deferred taxes upon
the completion of the valuation. As a result of these changes, goodwill, as
previously disclosed, has been changed as follows:
|
Provisional
goodwill
|
290,519 | |||
|
Intangible
assets – Trademark (“União”) and Purchase Contracts
|
(125,491 | ) | ||
|
Adjustments
of fair value of PP&E
|
(85,000 | ) | ||
|
Adjustments
of fair value of recoverable taxes
|
9,569 | |||
|
Adjustments
of fair value of receivables
|
33,669 | |||
|
Adjustments
of fair value of other assets and liabilities
|
(3,171 | ) | ||
|
Deferred
income tax
|
67,335 | |||
|
Goodwill
|
187,430 |
c. TEAS Terminal Exportador
de Álcool de Santos S.A.
On
November 24, 2009, the Company acquired, for US$11,574 cash, an additional 26.7%
interest, represented by 10,527,295 common shares, of TEAS Terminal Exportador
de Álcool de Santos S.A. (“TEAS”) from Crystalsev Comércio e Representação Ltda
and Plínio Nastari Consultoria e Participações Ltda. As a result of this
transaction, Cosan S.A. increased its direct share ownership in TEAS from 40.0%
to 66.7% and obtained control of TEAS. TEAS holds a port concession in the city
of Santos and operates a terminal dedicated to exporting ethanol.
The acquisition
date fair value of the consideration transferred totaled US$22,800, which
consisted of the following:
|
Cash
|
11,574 | |||
|
Acquisition
date fair value of initial 40% investment
|
11,226 | |||
|
Total
|
22,800 |
27
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
c. TEAS Terminal Exportador
de Álcool de Santos S.A. (Continued)
The following table
summarizes the fair values of the assets acquired and liabilities assumed at the
acquisition date. The company is in the process of analyzing the necessity to
obtain valuations of certain intangible assets and fixed assets; thus, the
provisional measurements of intangible assets, fixed assets and goodwill are
subject to change.
|
Description
|
||||
|
Property,
plant and equipment
|
12,089 | |||
|
Other
assets
|
489 | |||
|
Trade
accounts payable
|
(74 | ) | ||
|
Other
liabilities
|
(206 | ) | ||
|
Non-controlling
interest
|
(3,574 | ) | ||
|
Net assets
acquired
|
8,724 | |||
|
Consideration
transferred, net of cash acquired
|
12,917 | |||
|
Goodwill
|
4,193 | |||
The provisional
goodwill of US$4,193 arising from the acquisition consists largely of the
synergies and economies of scale expected from combining the Ethanol operations
of Cosan S.A. and TEAS. The provisional goodwill was assigned to
Sugar and Ethanol operating segment.
d. Logispot Armazens Gerais
Ltda. (“Logispot”)
On
November 12, 2009, Cosan S.A., through its subsidiary Rumo Logística S.A.,
acquired a 14.28% interest in Logispot, represented by 166,590 common shares,
for US$11,606 cash. Logispot is a logistics hub and warehouse based in the city
of Sumaré.
28
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
e. Cosan CL ( formerly
Essobrás)
On
December 1, 2008, Cosan and its subsidiary Usina da Barra S.A. Açúcar e Álcool
(“Usina da Barra”), through Cosan’s subsidiary Cosanpar Participações Ltda.
(“Cosanpar”), acquired, for US$714,353 cash and US$8,289 in transaction costs,
100 percent of the outstanding shares of Cosan CL, a distributor in Brazil of
oil products, ethanol, lubricants, and aviation fuel as well as an operator of
convenience stores. The network of service stations to which Cosan CL
distributes such products is comprised of more than 1,500 service stations. The
results of Cosan CL operations have been included in the consolidated financial
statements since the acquisition date.
As
additional consideration for the purchase, Cosan will pay to the sellers as a
contingent payment an amount based on a percentage of gross revenues of Cosan CL
and other amounts based on the quantity of barrels of some ExxonMobil products
sold during a 10 year period. These contingent payments will be recorded as
additional cost of the acquired entity when the contingency is
resolved.
The liabilities
assumed in the acquisition include Notes issued by Cosan CL on December 16, 1999
and December 10, 1999 pursuant to a Note Purchase Agreement dated December 8,
1999, as amended, in the aggregate principal amount of US$175,000, plus accrued
interest on such amount which was held by ExxonMobil Capital N.V.
From March 1992
until December 2001 Cosan CL did not pay the COFINS tax levied on sales or this
tax was paid and used to offset or otherwise applied against other taxes on the
sale of fuels and other oil derivatives which have been discussed with the
taxing authorities. During this period Cosan CL has made judicial deposits,
which are restricted cash placed on deposit with the court and are held in
judicial escrow for certain COFINS cases. The sellers have agreed to indemnify
Cosan for any COFINS matters and any losses related thereto if Cosan CL loses
these proceedings. If Cosan CL wins the proceedings, Cosan must pay the judicial
deposits and related interest to the sellers. Provision for contingencies net of
judicial deposits in the amount of US$18,468 related to this matter, is included
in net assets acquired.
29
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
e. Cosan CL ( formerly
Essobrás) (Continued)
The following table
summarizes the assets acquired and liabilities assumed.
|
Cosan
CL
|
||||
|
Description
|
US$
|
|||
|
Trade
accounts receivable
|
134,634 | |||
|
Inventories
|
141,167 | |||
|
Property,
plant and equipment
|
440,296 | |||
|
Intangible
assets
|
167,054 | |||
|
Other
assets
|
108,154 | |||
|
Loans and
financings
|
(25,638 | ) | ||
|
Trade
accounts payable
|
(79,680 | ) | ||
|
Deferred
income taxes
|
(92,637 | ) | ||
|
Notes payable
to ExxonMobil Capital N.V.
|
(175,327 | ) | ||
|
Estimated
liability for legal proceedings and labor claims (Note 14)
|
(111,608 | ) | ||
|
Estimated
liability for unrecognized tax benefits (Note 16)
|
(34,605 | ) | ||
|
Actuarial
liability
|
(31,338 | ) | ||
|
Other
liabilities
|
(41,107 | ) | ||
|
Net assets
(liabilities) acquired (assumed)
|
399,365 | |||
|
Consideration
transferred, net of cash acquired
|
711,858 | |||
|
Goodwill
|
312,493 | |||
Goodwill relating
to the Cosan CL acquisition, which is substantially based on future
profitability will be substantially deductible for tax purposes, and has been
assigned to the Fuel Distribution and Lubricants operating segment.
30
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
The following
unaudited pro forma financial information presents the pro forma results of
operations of Cosan and the acquired companies as if the acquisitions had
occurred at the beginning of the years presented. The unaudited pro forma
financial information does not purport to be indicative of the results that
would have been obtained if the acquisitions had occurred as of the beginning of
the years presented or that may be obtained in the future:
|
2010
|
2009
|
|||||||
|
Net
sales
|
8,380,069 | 6,686,752 | ||||||
|
Net (loss)
income
|
488,013 | (302,954 | ) | |||||
|
Basic EPS
(loss per share) per thousand shares (US$)
|
1.30 | (1.01 | ) | |||||
|
Diluted EPS
(loss per share) per thousand shares (US$)
|
1.29 | * | ||||||
*Antidilutive
|
9.
|
Goodwill
and other Intangible assets
|
Goodwill
The carrying
amounts of goodwill by reporting segment as of March 31, 2010 and 2009 are as
follows:
|
Sugar
and Ethanol
segment
(S&E)
|
Sugar
Logistics
segment
(Rumo)
|
Fuels
Distribution
and Lubricants
segment
(CCL)
|
Total
|
|||||||||||||
|
Balance as of
April 30, 2008
|
688,383 | - | - | 688,383 | ||||||||||||
|
Acquisitions
|
- | - | 312,493 | 312,493 | ||||||||||||
| Total tax benefit applied to reduce goodwill | (11,736 | ) | - | - | (11,736 | ) | ||||||||||
|
Effect of
currency translation
|
(186,724 | ) | - | 854 | (185,870 | ) | ||||||||||
|
Balance as of
March 31, 2009
|
489,923 | - | 313,347 | 803,270 | ||||||||||||
|
Acquisitions
|
187,430 | 27,739 | - | 215,169 | ||||||||||||
|
Sale of
Esso´s Aviation business
|
- | - | (19,374 | ) | (19,374 | ) | ||||||||||
|
Addition
related to contingent consideration from Cosan CL
acquisition
|
- | - | 26,208 | 26,208 | ||||||||||||
|
Effect of
currency translation
|
165,507 | 7,927 | 90,918 | 264,352 | ||||||||||||
|
Balance as of
March 31, 2010
|
842,860 | 35,666 | 411,099 | 1,289,625 | ||||||||||||
31
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
9.
|
Goodwill and other Intangible
assets (Continued)
|
There are no
accumulated impairment losses.
Other
intangible assets
|
As
of March 31, 2010
|
|||||||||||||
|
Weighted
|
|||||||||||||
|
Gross
|
average
|
Net
|
|||||||||||
|
carrying
|
amortization
|
Accumulated
|
Carrying
|
||||||||||
|
amount
|
period
|
amortization
|
Amount
|
||||||||||
|
Intangible
assets subject to amortization:
|
|||||||||||||
|
Favorable
operating leases
|
126,615 |
16
years
|
(46,624 | ) | 79,991 | ||||||||
|
Trademark
(“Barra”)
|
6,689 |
15
years
|
(3,383 | ) | 3,306 | ||||||||
|
Trademark
(“Esso”)
|
70,130 |
5
years
|
(18,701 | ) | 51,429 | ||||||||
|
Trademark ("
União")
|
49,663 |
50
years
|
(828 | ) | 48,835 | ||||||||
|
Port
concession
|
177,977 |
27
years
|
(6,592 | ) | 171,385 | ||||||||
|
Purchase
Contracts
|
87,313 |
18
years
|
(4,042 | ) | 83,271 | ||||||||
|
Customer base
- Esso
|
150,904 |
29
years
|
(6,938 | ) | 143,966 | ||||||||
|
Software
|
46,912 |
5
years
|
(28,522 | ) | 18,390 | ||||||||
|
Total
|
716,203 | (115,630 | ) | 600,573 | |||||||||
|
As
of March 31, 2009
|
|||||||||||||
|
Weighted
|
|||||||||||||
|
Gross
|
average
|
Net
|
|||||||||||
|
carrying
|
amortization
|
Accumulated
|
Carrying
|
||||||||||
|
amount
|
period
|
amortization
|
Amount
|
||||||||||
|
Intangible
assets subject to amortization:
|
|||||||||||||
|
Favorable
operating leases
|
97,401 |
16
years
|
(30,036 | ) | 67,365 | ||||||||
|
Trademark
(“Barra”)
|
5,145 |
15
years
|
(2,259 | ) | 2,886 | ||||||||
|
Trademark
(“Esso”)
|
53,949 |
5
years
|
(3,597 | ) | 50,352 | ||||||||
|
Customer
base - Esso
|
116,085 |
29
years
|
(7,738 | ) | 108,347 | ||||||||
|
Software
|
27,526 |
5
years
|
(15,125 | ) | 12,401 | ||||||||
|
Total
|
300,106 | (58,755 | ) | 241,351 | |||||||||
The intangible
assets identified in each acquisition were valued based on the benefit that each
acquired company had in contracts with third parties with market
benefits/discounts. The intangible assets are amortized on the straight-line
method based on the contract periods.
32
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
9.
|
Goodwill and other Intangible
assets (Continued)
|
No
significant residual value is estimated for these intangible assets. The
following table represents the total estimated amortization of intangible assets
for the five succeeding years:
|
2011
|
46,818 | |||
|
2012
|
46,818 | |||
|
2013
|
41,471 | |||
|
2014
|
34,704 | |||
|
2015
|
24,506 | |||
|
Thereafter
|
406,256 | |||
| 600,573 |
|
10.
|
Accounts
receivable from Federal Government
|
The subsidiary
Cosan Açúcar e Álcool has several indemnification suits filed against the
Federal Government. The suits relate to product prices that did not conform to
the reality of the market, which were mandatorily established at the time the
sector was under the Government‘s control.
In
connection with one of these suits, a final and unappealable decision in the
amount of US$149,121 was rendered in September 2006 in favor of Usina de Barra.
This has been recorded as a gain in the statement of operations in 2007. Since
the recorded amount is substantially composed of interest and monetary
restatement, it was recorded in financial income and in a non-current receivable
on the balance sheet. In connection with the settlement process, the form of
payment continues to be negotiated with the government.
At
March 31, 2010, the receivable and corresponding lawyers’ fees totaled
US$187,385 and US$22,486 (US$139,700 and US$16,764 at March 31, 2009),
respectively.
33
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
11.
|
Taxes
payable
|
|
March
31,
2010
|
March
31,
2009
|
|||||||
|
Tax Recovery
Program – Federal REFIS (1)
|
- | 69,516 | ||||||
|
Special Tax
Payment Program – PAES (1)
|
230 | 28,912 | ||||||
|
Tax Recovery
from Brazilian Law No 11.941/09 and MP 470/09
|
373,650 | - | ||||||
|
Income Tax
and Social Contribution
|
50,471 | 71,747 | ||||||
|
Others
|
78,657 | 48,719 | ||||||
| 503,008 | 218,894 | |||||||
|
Current
liabilities
|
(121,203 | ) | (69,273 | ) | ||||
|
Long-term
liabilities
|
381,805 | 149,621 | ||||||
|
|
(1)
|
These tax
recovery programs have been reassessed and transferred to the Tax Recovery from
Brazilian Law No 11.941/09 and MP 470/09, except for the recovery program
related to PAES – salário
educação.
|
On
May 27, 2009 and October 13, 2009, Law 11.941 and MP 470 were approved by the
Brazilian government creating a tax recovery program, permitting the taxpayer to
settle its federal tax debts, previous recovery programs, and other federal
taxes under court discussions with discounts on previously charged penalties and
interest and in installments.
Additionally, it
was permitted for the taxpayer to offset a portion of the penalties and interest
due with its balance of income tax loss carry forwards. MP470 also allowed
taxpayers to use tax losses to offset the principal balance related to IPI taxes
(credit premium, Note 15).
34
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
11.
|
Taxes payable
(Continued)
|
During the fiscal
year, Cosan S.A. and subsidiaries joined the tax recovery program and the
following effects were recorded:
|
2010
|
||||
|
Tax payable
and related estimated liability for legal proceedings before joining the
tax recovery program Law 11.941 and MP 470
|
898,802 | |||
|
Legal
reductions
|
(348,604 | ) | ||
|
Net
balance overdue on tax recovery program Law 11.941 and MP
470
|
550,198 | |||
|
Tax payable
and related estimated liability for legal proceedings recorded before
joining the tax recovery program Law 11.941 and MP 470
|
(701,985 | ) | ||
|
Current
translation adjustment
|
6,930 | |||
|
Gain
on tax recovery program
|
(144,857 | ) | ||
|
Net
balance overdue on tax recovery program Law 11.941 and MP
470
|
550,198 | |||
|
Amortization
of Judicial Deposits
|
(56,620 | ) | ||
|
Use of income
tax loss carry forward
|
(114,488 | ) | ||
|
Installments
paid
|
(16,444 | ) | ||
|
Interest
|
11,004 | |||
|
Tax Recovery from Brazilian Law No 11.941/09 and
MP 470/09 as of March 31, 2010
|
373,650 | |||
|
12.
|
Long-term
debt
|
Long-term debt is
summarized as follows:
|
Index
|
Average
annual interest rate
|
March
31, 2010
|
March
31, 2009
|
||||||||||
|
Resolution
No. 2471 (PESA)
|
IGP-M
|
4.0 | % | 295,291 | 213,314 | ||||||||
|
Senior notes
due 2009
|
US
Dollar
|
9.0 | % | - | 37,343 | ||||||||
|
Senior notes
due 2014
|
US
Dollar
|
9.5 | % | 354,433 | - | ||||||||
|
Senior notes
due 2017
|
US
Dollar
|
7.0 | % | 404,589 | 404,589 | ||||||||
|
IFC
|
US
Dollar
|
7.4 | % | - | 49,379 | ||||||||
|
Perpetual
notes
|
US
Dollar
|
8.3 | % | 455,304 | 455,304 | ||||||||
|
BNDES
|
TJLP
|
2.6 | % | 520,068 | 99,561 | ||||||||
|
Promissory
notes
|
DI
|
3.0 | % | - | 501,888 | ||||||||
|
Credit
notes
|
DI
|
2.4 | % | 212,660 | - | ||||||||
|
Credit
notes
|
US
Dollar
|
6.2 | % | 102,656 | - | ||||||||
|
Export
Pre-payment
|
US
Dollar
|
5.2 | % | 547,230 | - | ||||||||
|
Others
|
Various
|
Various
|
396,315 | 115,876 | |||||||||
| 3,288,546 | 1,877,254 | ||||||||||||
|
Current
portion
|
(445,593 | ) | (630,260 | ) | |||||||||
|
Long-term
debt
|
2,842,953 | 1,246,994 | |||||||||||
35
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
12.
|
Long-term
debt--Continued
|
Long-term debt has
the following scheduled maturities:
|
2012
|
339,438 | |||
|
2013
|
416,285 | |||
|
2014
|
127,810 | |||
|
2015
|
472,831 | |||
|
2016
|
59,154 | |||
|
2017
|
459,247 | |||
|
2018
|
57,141 | |||
|
2019
and thereafter
|
911,047 | |||
| 2,842,953 |
Resolution
No. 2471 - Special Agricultural Financing Program (Programa Especial de
Saneamento de Ativos), or PESA
To
extend the repayment period of debts incurred by Brazilian agricultural
producers, the Brazilian government passed Law 9.138 followed by Central Bank
Resolution 2,471, which, together, formed the PESA program. PESA
offered certain agricultural producers with certain types of debt the
opportunity to acquire Brazilian treasury bills (“CTNs”) in an effort to
restructure their agricultural debt. The face value of the Brazilian treasury
bills was the equivalent of the value of the restructured debt and was for a
term of 20 years.
The acquisition
price was calculated by the present value, discounted at a rate of 12% per year
or at the equivalent of 10.4% of its face value. The CTNs were deposited as a
guarantee with a financial institution and cannot be renegotiated until the
outstanding balance is paid in full. The outstanding balance associated with the
principal is adjusted in accordance with the IGP-M until the expiration of the
restructuring term, which is also 20 years, at which point the debt will be
discharged in exchange for the CTNs. Because the CTNs will have the same face
value as the outstanding balance at the end of the term, it will not be
necessary to incur additional debt to pay PESA debt.
On
July 31, 2003, the Central Bank issued Resolution 3,114, authorizing the
reduction of up to five percentage points of PESA related interest rates,
effectively lowering the above-mentioned rates to 3%, 4% and 5%, respectively.
The CTNs held by Cosan as of March 31, 2010 and 2009 amounted to US$133,039 and
US$91,717, respectively, and considered as restricted cash and are classified as
other non-current assets.
36
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
12.
|
Long-term debt
(Continued)
|
Senior
notes due 2017
On
January 26, 2007, the wholly-owned subsidiary Cosan Finance Limited issued
US$400,000 of senior notes in the international capital markets. These senior
notes, listed on the Luxembourg Stock Exchange, mature in November 2017 and bear
interest at a rate of 7% per annum, payable semi-annually. The senior notes are
guaranteed by Cosan, and its subsidiary, Cosan Açúcar e Álcool.
Senior
notes due 2014
On
August 4, 2009, the indirect subsidiary CCL Finance Limited issued US$ 350,000
of senior notes in the international capital markets. These senior notes, listed
on the Luxembourg Stock Exchange, mature in August 2014 and bear interest at a
rate of 9.5% per annum, payable semi-annually in February and August of each
year, from February of 2010.
Perpetual
notes
On
January 24 and February 10, 2006, Cosan issued perpetual notes which are listed
on the Luxembourg Stock Exchange - EURO MTF. These notes bear interest at a rate
of 8.25% per year, payable quarterly on May 15, August 15, November 15 and
February 15 of each year, beginning May 15, 2006.
These notes may, at
the discretion of Cosan, be redeemed on any interest payment date subsequent to
February 15, 2011. The notes are guaranteed by Cosan and by Usina da
Barra.
Promissory
Notes
On
November 17, 2008, the Company issued one series of 44 registered promissory
notes for US$520,021. The notes which are due in one year, will bear interest,
due at maturity, at the average rates of DI - Interbank Deposits plus
3%.
On
November 12, 2009, the Company fully paid this debt. At this date, the amount
paid totaled US$703,801.
37
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
12.
|
Long-term debt
(Continued)
|
Export
Pre-payment Notes
During the third
quarter of 2009, the Company obtained funds from export pre-payment notes at the
total amount of US$530,000. The export pre-payment notes are due from 2012
through 2014, and bear interest of Libor plus 5.2%.
BNDES
Refers to the
financing of cogeneration projects, as well as the financing of Jataí and
Caarapó greenfields (sugar and ethanol mills).
Credit
Notes
The Company
executed several credit note agreements with several financial institutions
during 2010 which will be paid through export operations during 2012. The credit
notes bear interest at rates between 2.1% and 6.2% per annum, payable
semi-annually.
Covenants
Cosan and its
subsidiaries are subject to certain restrictive covenants related to their
indebtedness.
At
March 31, 2010, Cosan was in
compliance with its debt covenants.
38
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
13.
|
Related
parties
|
Assets and
liabilities with related parties are summarized as follows:
|
Assets
|
||||||||
|
March
31, 2010
|
March
31, 2009
|
|||||||
|
Cosan
Alimentos S.A.
|
- | 13,123 | ||||||
|
Rezende
Barbosa S.A. Administração e Participações
|
48,889 | - | ||||||
|
Vertical UK
LLP
|
- | 11,597 | ||||||
|
Others
|
10,780 | - | ||||||
| 59,669 | 24,720 | |||||||
|
Current (*)
|
(13,958 | ) | (24,720 | ) | ||||
|
Noncurrent
(*)
|
45,711 | - | ||||||
|
Liabilities
|
||||||||
|
March
31, 2010
|
March
31, 2009
|
|||||||
|
Cosan
Limited
|
- | 175,307 | ||||||
|
Logispot
Armazéns Gerais S.A.
|
6,313 | - | ||||||
|
Others
|
1,781 | 1,926 | ||||||
| 8,094 | 177,233 | |||||||
|
Current
(*)
|
8,094 | (2,233 | ) | |||||
|
Noncurrent
|
- | 175,000 | ||||||
(*) included in
other current and noncurrent assets or liabilities captions
The amount
receivable from Cosan Alimentos S.A. referred to an intercompany loan not
subject to interest.
A
receivable of US$48,889 with Rezende Barbosa S.A. Administração e Participações
related to credits assumed by Rezende Barbosa, in connection with the
acquisition of Cosan Alimentos and intercompany loans.
The amount
receivable from the affiliate Vertical UK LLP, located in British Virgin
Islands, refers to ethanol trading, with an average maturity date of 30
days.
The payable to
Cosan Limited related to Floating Rate Notes issued by Cosan CL., equivalent to
US$175,000, with original maturity in 2018. Such balance bore variable interest
equivalent to the quarterly Libor rate plus interest of
2.8% p.a., paid quarterly. On August 25, 2009, Cosan CL fully paid this debt
with the proceeds from the issuance of the Senior Notes due 2014 (Note
11).
39
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
13.
|
Related parties
(Continued)
|
The payable to
Logispot is related to the remaining payment in connection with the interest
acquired (Note 8).
Cosan conducts some
of its operations through various joint ventures and other partnership forms
which are principally accounted for using the equity method. The
income statement includes the following amounts resulting from transactions with
related parties:
|
2010
|
2009
|
2008
|
||||||||||
|
Transactions
involving assets
|
||||||||||||
|
Cash received
due to the sale of finished products and assets and
services held, net of payments
|
(159,734 | ) | (242,320 | ) | (36,773 | ) | ||||||
|
Sale of
finished products and services
|
137,147 | 122,381 | 46,410 | |||||||||
|
Sale of real
estate (land) (Note 21)
|
- | 13,967 | - | |||||||||
|
Sale of
interest in a subsidiary (Note 21)
|
- | 123,649 | - | |||||||||
|
Financial
income
|
9,624 | - | - | |||||||||
|
Added through
acquisition
|
39,240 | - | - | |||||||||
|
Transactions
involving liabilities
|
||||||||||||
|
Payment of
financial resources, net of funding
|
2,698 | - | - | |||||||||
|
Due to Cosan
Limited
|
(172,721 | ) | 178,455 | - | ||||||||
|
Financial
expenses/(income)
|
(42,126 | ) | 1,478 | - | ||||||||
|
Other
|
- | (2,700 | ) | (395 | ) | |||||||
The purchase and
sale of products are carried out at arm’s length and unrealized profit or losses
with consolidated companies have been eliminated. Those operations are also
carried out at prices and under conditions similar to those existing in the
market.
At
March 31, 2010, Cosan S.A. and its subsidiaries were lessees of approximately
68,000 hectares (unaudited) (35,000 hectares (unaudited) in 2009) of affiliated
companies land and its related party Radar Propriedades Agrícolas S.A., which is
controlled by another shareholder. These operations are carried out under
conditions and prices similar to those prevailing in the market, calculated
based on sugarcane tons per hectare, valued in accordance with the price
established by CONSECANA (São Paulo State Council of Sugarcane, Sugar and
Ethanol Producers).
40
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
14.
|
Pension
and other postretirement benefits
|
|
|
a)
|
Description
of the plans
|
The Company’s
subsidiary Cosan CL has a noncontributory defined benefit pension plan covering
substantially all of its employees upon their retirement.
|
|
b)
|
Changes
in plan assets and plan liabilities
|
Cosan CL performs the actuarial
valuation of its defined benefit plan using its March 31 year-end as the
measurement date. An actuarial valuation as of the acquisition date was also
prepared. Information with respect to Cosan CL’s defined benefit plan
is as follows:
|
March
31,
2010
|
March
31,
2009
|
|||||||
|
Change
in benefit obligation
|
||||||||
|
Projected
benefit obligation
|
156,505 | 153,171 | ||||||
|
Service
cost
|
2,935 | 578 | ||||||
|
Interest cost
on pension benefit obligation
|
16,291 | 3,367 | ||||||
|
Benefits
payments
|
(10,173 | ) | (1,710 | ) | ||||
|
Actuarial
(gain) losses
|
(28,817 | ) | (102 | ) | ||||
|
Effect of
exchange rate changes
|
46,041 | 1,201 | ||||||
|
Projected
benefit obligation at end of year
|
182,782 | 156,505 | ||||||
|
Change
in plan assets
|
||||||||
|
Fair value of
plan assets at date of acquisition
|
128,382 | 121,518 | ||||||
|
Actual return
on plan assets
|
31,638 | 6,218 | ||||||
|
Employer
contributions
|
4,503 | 1,371 | ||||||
|
Benefits
payments
|
(9,135 | ) | (1,710 | ) | ||||
|
Effect of
exchange rate changes
|
39,841 | 985 | ||||||
|
Fair
value of plan assets at end of year
|
195,229 | 128,382 | ||||||
41
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
14.
|
Pension and other
postretirement benefits
(Continued)
|
|
|
b)
|
Changes in plan assets and plan
liabilities (Continued)
|
|
March
31,
2010
|
March
31,
2009
|
|||||||
|
Accrued
pension cost asset (liability)
|
||||||||
|
Funded
status, excess projected benefit obligation over plan
assets
|
12,447 | (28,123 | ) | |||||
|
Accrued
pension cost – Other non-current assets
|
12,447 | - | ||||||
|
Accrued
pension cost – Other current liabilities
|
- | (7,211 | ) | |||||
|
Accrued
pension cost – Other non-current liabilities
|
- | (20,912 | ) | |||||
|
c)
|
Amounts
recognized in accumulated other comprehensive income
(loss)
|
Amounts recognized
in accumulated other comprehensive income (loss) consist of:
|
Pension
benefits
|
||||||||
|
March
31,
2010
|
March
31,
2009
|
|||||||
|
Unrecognized
gains
|
50,202 | 3,553 | ||||||
|
Deferred
income taxes
|
(17,068 | ) | (1,208 | ) | ||||
|
Effect of
currency translation
|
(2,934 | ) | 19 | |||||
| 30,200 | 2,364 | |||||||
|
|
d)
|
Net
periodic benefit cost
|
Net periodic
pension cost includes the following components for the period since the date of
acquisition:
|
March
31,
2010
|
March
31,
2009
|
|||||||
|
Service
cost
|
2,935 | 578 | ||||||
|
Interest cost
on projected benefit obligation
|
16,291 | 3,367 | ||||||
|
Expected
return on plan assets:
|
(15,558 | ) | (2,767 | ) | ||||
|
Net periodic
pension cost
|
3,668 | 1,178 | ||||||
The unrecognized
gain that will be amortized from accumulated other comprehensive income (loss)
into net periodic benefit cost during the next year is U$3,144.
42
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
14.
|
Pension and other
postretirement benefits
(Continued)
|
|
|
e)
|
Actuarial
assumptions
|
Assumptions used
for the actuarial calculations were as follows:
Assumptions used to
determine benefit obligations:
|
March
31,
2010
|
March
31,
2009
|
|||||||
|
Discount
rate
|
11.08 | % | 9.20 | % | ||||
|
Rate of
compensation increase
|
6.07 | % | 5.56 | % | ||||
Assumptions used to
determine net periodic benefit cost:
|
March
31,
2010
|
March
31,
2009
|
|||||||
|
Discount
rate
|
11.08 | % | 9.20 | % | ||||
|
Expected
long-term rates of return on plan assets
|
10.48 | % | 10.59 | % | ||||
|
Rate of
compensation increase
|
6.07 | % | 5.56 | % | ||||
The discount rate
is determined using bond portfolios with an average maturity approximating that
of the liabilities or spot yield curves, both of which are constructed using
high-quality, local-currency-denominated bonds. The expected long-term rate of
return is based on the portfolio as a whole and not on the sum of the returns on
individual asset categories.
The accumulated
benefit obligation is as follows:
|
Accumulated
benefit obligation
|
March
31,
2010
|
March
31,
2009
|
||||||
|
Actuarial
present value of:
|
||||||||
|
Vested
benefit obligation
|
142,967 | 121,362 | ||||||
|
Non-vested
benefit obligation
|
20,651 | 17,820 | ||||||
|
Total
accumulated benefit obligation
|
163,618 | 139,182 | ||||||
The asset
allocations of the Company’s plan assets as of the measurement dates were as
follows:
|
Asset
allocation (%)
|
||||||||||||
|
March
31,
|
March
31,
|
|||||||||||
|
Asset
category
|
2010
|
2009
|
Target
|
|||||||||
|
Equity
securities
|
25 | 25 | 25 | |||||||||
|
Debt
securities
|
75 | 75 | 75 | |||||||||
|
Total
|
100 | 100 | 100 | |||||||||
43
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
14.
|
Pension and other
postretirement benefits
(Continued)
|
|
|
f)
|
Cash
flows
|
The expected
contribution to the Plan for 2010 of US$4,287, was estimated based on the actual
plan cost as of the valuation date. The expected benefit payments for 2010,
amounting to US$10,013, were estimated based on the projected benefit obligation
as of the valuation date.
The following
benefit payments, which reflect expected future service, as appropriate, are
expected to be paid:
|
2010
|
10,013
|
|
2011
|
10,582
|
|
2012
|
11,363
|
|
2013
|
12,172
|
|
2014
|
12,892
|
|
2015 to
2019
|
85,196
|
|
|
g)
|
Investment
strategy and policies:
|
The pension plan
management implemented an asset investment policy to manage the investments and
risk concentration of the Plan.
The investment
policy establishes principles and guidance that must be followed in investing
the resources of the plan. The Company’s investment goals are to maximize
returns subject to specific risk management policies, with a philosophy of
investment based on a long term perspective.
Its risk management
policies permit investments only in fixed income and equity
securities.
The Investment
Committee is responsible by the tactical decisions about resource allocations
and modifications of the investment policy.
The investment in
equity securities is targeted to be approximately of 25% of the investment
portfolio, with the remaining amount invested in fixed income securities and
funds. This target could change depending on the market conditions. The limits
of allocation are determined based on the characteristics of the population of
participants of the pension plan and actuarial target.
44
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
14.
|
Pension and other
postretirement benefits
(Continued)
|
The table below
demonstrates how the resources can be allocated:
|
Minimum
|
Maximum
|
Target
|
||||||||||
|
Asset
category
|
||||||||||||
|
Fixed
income
|
30 | % | 100 | % | 75 | % | ||||||
|
Equity
securities
|
- | 70 | % | 25 | % | |||||||
The risk
concentration is mitigated through procedures which permit identifying,
evaluating, controlling and monitoring several risks which the plan resources
are exposed to, among them market, credit, liquidity, operating, legal and
systemic.
|
|
h)
|
Fair
value of plan assets by major
categories
|
The fair value of
investments as of March 31, 2010 is set forth below:
|
March
31,
2010
|
||||
|
Asset
category
|
||||
|
Fixed
income
|
146,422 | |||
|
Equity
securities
|
48,807 | |||
|
Total
|
195,229 | |||
|
Fair
value measurement on plan assets at March 31, 2010
|
||||
|
Level 1 /
Total
|
||||
|
Asset
category
|
||||
|
Fixed
income
|
146,422 | |||
|
Equity
securities
|
48,807 | |||
|
Total
|
195,229 | |||
45
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
15.
|
Estimated
liability for legal proceedings and
commitments
|
|
March
31, 2010
|
March
31, 2009
|
|||||||
|
Tax
contingencies
|
173,924 | 430,342 | ||||||
|
Civil and
labor contingencies
|
120,681 | 67,306 | ||||||
| 294,605 | 497,648 | |||||||
Cosan and its
subsidiaries are parties in various ongoing labor claims, civil and tax
proceedings in Brazil arising in the normal course of its business. Respective
provisions for contingencies were recorded considering those cases in which the
likelihood of loss has been rated as probable. Management believes resolution of
these disputes will have no effect significantly different than the estimated
amounts accrued.
Judicial deposits
recorded by Cosan under non-current assets, amounting to US$94,083 at March 31,
2010 (US$73,975 at March 31, 2009) have been made for certain of these suits.
Judicial deposits are restricted assets of Cosan placed on deposit with the
court and held in judicial escrow pending legal resolution of the related legal
proceedings. The company used judicial deposits to pay for a portion of the tax
recovery program as discussed in Note 11.
The major tax
contingencies as of March 31, 2010 and 2009 are described as
follows:
|
2010
|
2009
|
|||||||
|
Credit
premium – IPI (i)
|
- | 116,256 | ||||||
|
PIS and
Cofins (ii)
|
11,910 | 62,556 | ||||||
|
IPI credits
(i)
|
- | 40,049 | ||||||
|
Contribution
to IAA (i)
|
- | 36,672 | ||||||
|
IPI – Federal
VAT (i)
|
4,692 | 23,626 | ||||||
|
ICMS
credits
|
33,824 | 19,966 | ||||||
|
Compensation
with Finsocial (iii)
|
97,114 | 70,693 | ||||||
|
Other
|
26,384 | 60,524 | ||||||
| 173,924 | 430,342 | |||||||
|
|
(i)
|
The Company
and its subsidiaries opted to settle tax related claims in installments as
provided by Brazilian Law No 11.941/09 and in MP 470/09. The Company and
its subsidiaries used accumulated tax losses to pay the related fines and
interest. Consequently there was a full reduction of the claims related to
IPI tax credit, as well as the installment payment of other federal taxes,
that were recorded as Taxes Payable (note
11).
|
46
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
15.
|
Estimated liability for legal
proceedings and commitments
(Continued)
|
|
(ii)
|
On May 27,
2009, the 1st and 3rd paragraphs of Brazilian Law No 9718/98 that
regulated the collection of PIS and Cofins (federal tax contributions) on
exchange variation and other financial income was revoked by Law No
11941/09. The Company evaluated its ongoing judicial demands related to
the legal obligations not paid related to the increase in the calculation
basis of PIS and Cofins and reversed the related provision at the amount
of US$30,213.
|
|
(iii)
|
From June to
December of 1994, the subsidiary Cosan CL used tax credits on COFINS taxes
based on a favorable court ruling and compensated with other federal
taxes. During 2008 the federal tax authorities in Brazil issued an
assessment invalidating such compensation and therefore a provision
related to this matter was
recorded.
|
The detail of the
movement in the estimated liability for legal proceedings and labor claims is as
follows:
|
Balance
at April 30, 2008
|
494,098 | |||
|
Provision
|
37,731 | |||
|
Business
acquisition
|
111,608 | |||
|
Settlements
|
(12,097 | ) | ||
|
Foreign
currency translation
|
(133,692 | ) | ||
|
Balance
at March 31, 2009
|
497,648 | |||
|
Provision
|
47,732 | |||
|
Business
acquisition (see Note 8)
|
14,756 | |||
|
Settlements
|
(409,576 | ) | ||
|
Foreign
currency translation
|
144,404 | |||
|
Balance
at March 31, 2010
|
294,605 |
47
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
15.
|
Estimated liability for legal
proceedings and commitments
(Continued)
|
In
addition to the aforementioned claims, Cosan and its subsidiaries are involved
in other contingent liabilities relating to tax, civil and labor claims and
environmental matters, which have not been recorded, considering their current
stage and the likelihood of unfavorable outcomes rated as possible. These claims
are broken down as follows:
|
March
31,
2010
|
March
31,
2009
|
|||||||
|
ICMS – State
VAT
|
180,988 | 77,052 | ||||||
|
Withholding
Income Tax
|
102,652 | 69,730 | ||||||
|
IAA - Sugar
and Ethanol Institute
|
1,428 | 31,610 | ||||||
|
IPI - Federal
Value-added tax
|
246,190 | 100,722 | ||||||
|
INSS
|
2,280 | 795 | ||||||
|
PIS and
COFINS
|
80,604 | 15,529 | ||||||
|
Civil and
labor
|
275,403 | 94,599 | ||||||
|
Other
|
66,134 | 34,851 | ||||||
| 955,679 | 424,888 | |||||||
The provisions for
tax, civil and labor contingencies are included in the statement of operations
as follows:
|
2010
|
2009
|
2008
|
||||||||||
|
Financial
expenses
|
23,412 | 26,541 | 20,925 | |||||||||
|
Other income
(expenses)
|
16,832 | 11,190 | 4,995 | |||||||||
|
Income
taxes
|
- | - | 258 | |||||||||
| 40,244 | 37,731 | 26,178 | ||||||||||
48
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
15.
|
Estimated liability for legal
proceedings and commitments
(Continued)
|
Commitments
Sales
Considering that
Cosan operates mainly in the commodities market, its sales are substantially
made at prices applicable at sales date, and therefore, there are no outstanding
orders with amounts involved. However, Cosan has several agreements in the sugar
market in which there are commitments of sales involving volumes of these
products in future harvest periods.
The commitments to
sell sugar by harvest period are as follows (unaudited):
|
(In
tons)
|
||||||||
|
Harvest
period
|
2010
|
2009
|
||||||
|
2010
|
- | 2,428,000 | ||||||
|
2011
|
2,005,434 | 1,828,000 | ||||||
|
2012
|
1,828,134 | 1,828,000 | ||||||
|
Total
|
3,833,568 | 6,084,000 | ||||||
Purchase
Cosan has entered
into several commitments to purchase sugarcane from third parties in order to
guarantee part of its production for the next harvest periods. The amount of
sugarcane to be purchased was calculated based on an estimation of the sugarcane
to be harvested in each geographic area. The amount to be paid by Cosan will be
determined for each harvest period at the end of such harvest period according
to price of the sugarcane published by CONSECANA.
49
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
15.
|
Estimated liability for legal
proceedings and commitments
(Continued)
|
Commitments
(Continued)
Purchase
(Continued)
The purchase
commitments by harvest period as of March 31, 2010 and 2009 are as follows
(unaudited):
|
Harvest
period
|
2010
|
2009
|
||||||
|
2010
|
- | 18,294,022 | ||||||
|
2011
|
27,029,473 | 15,597,478 | ||||||
|
2012
|
23,600,912 | 13,667,154 | ||||||
|
2013
|
20,112,639 | 9,754,713 | ||||||
|
2014
|
16,345,120 | 5,701,801 | ||||||
|
2015
|
13,667,148 | 3,198,591 | ||||||
|
2016 and
thereafter
|
120,129,217 | 5,030,758 | ||||||
|
Total
|
220,884,509 | 71,244,517 | ||||||
As
of March 31, 2010, Cosan had a normal capacity to crush 60,000 thousand tons
(unaudited) of sugarcane during each harvest period.
In
addition, the Company entered into contracts to purchase industrial equipment
intended for maintenance and expansion of the mills, and to meet the demand of
the electric energy co-generation project, in the total amount of US$185,739 at
March 31, 2010 (US$309,602 at March 31, 2009) (unaudited
information).
50
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
15.
|
Estimated liability for legal
proceedings and commitments
(Continued)
|
Additionally, the
Company through its subsidiary Rumo Logistica S.A. entered into a commitment to
purchase railcars, locomotives and invest in rail track improvements aimed at
the expansion of the logistics business, as follows:
|
Year
ended
|
2010
|
|||
|
2011
|
366,467 | |||
|
2012
|
71,248 | |||
|
2013
|
53,162 | |||
|
Total
|
490,877 | |||
Leases
Cosan also has
noncancelable operating leases in Brazil, primarily related to seaport and lands
for the plantation of sugarcane, which expire up to the next 20
years.
Minimum rent
payments under operating leases are recognized on a straight-line basis over the
term of the lease. Rental expense for operating leases during 2010, 2009 and
2008 consisted of the following:
|
2010
|
2009
|
2008
|
||||||||||
|
Minimum
rentals
|
61,062 | 46,233 | 29,767 | |||||||||
|
Contingent
rentals
|
60,545 | 44,498 | 65,990 | |||||||||
|
Rental
expense
|
121,607 | 90,731 | 95,757 | |||||||||
Future minimum
lease payments under noncancelable operating leases (with initial or remaining
lease terms in excess of one year) as of March 31, 2010 are:
|
2010
|
||||
|
Year ending
March 31:
|
||||
|
2011
|
73,757 | |||
|
2012
|
66,220 | |||
|
2013
|
65,806 | |||
|
2014
|
66,061 | |||
|
2015
|
65,935 | |||
|
Thereafter
|
760,529 | |||
|
Total minimum
lease payments
|
1,098,308 | |||
51
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
16.
|
Financial
income and expenses, net
|
|
2010
|
2009
|
2008
|
||||||||||
|
Financial
expenses
|
||||||||||||
|
Interest
|
(211,892 | ) | (142,434 | ) | (149,191 | ) | ||||||
|
Monetary
variation – losses
|
(88,317 | ) | (29,870 | ) | (36,844 | ) | ||||||
|
CPMF expenses
(1)
|
- | - | (10,376 | ) | ||||||||
|
Bank
charges
|
(422 | ) | (934 | ) | (641 | ) | ||||||
|
Interest and
fees paid on advanced payment of Senior Notes 2009
|
(275 | ) | - | (16,513 | ) | |||||||
| (300,906 | ) | (173,238 | ) | (213,565 | ) | |||||||
|
Financial
income
|
||||||||||||
|
Interest
|
68,042 | 46,851 | 64,014 | |||||||||
|
Monetary
variation – Gains
|
6,249 | 4,115 | 17,815 | |||||||||
|
Discounts
obtained
|
609 | 171 | (105 | ) | ||||||||
|
Other
income
|
- | - | - | |||||||||
| 74,900 | 51,137 | 81,724 | ||||||||||
|
Sub
total
|
(226,006 | ) | (122,101 | ) | (131,841 | ) | ||||||
|
Foreign
exchange variation, net
|
255,171 | (275,528 | ) | 172,863 | ||||||||
|
Gain on
derivatives, net
|
151,077 | 22,918 | 38,262 | |||||||||
|
Financial
(Expense) / Income, net
|
180,242 | (374,711 | ) | 79,284 | ||||||||
|
|
(1)
|
Tax on
Financial Transactions – CPMF
|
|
17.
|
Income
taxes
|
Income tax benefit
(expense) attributable to income from continuing operations consists
of:
|
2010
|
2009
|
2008
|
||||||||||
|
Income taxes
benefit (expense):
|
||||||||||||
|
Current
|
(41,940 | ) | (638 | ) | 21,226 | |||||||
|
Deferred
|
(142,841 | ) | 145,328 | (1,416 | ) | |||||||
| (184,781 | ) | 144,690 | 19,810 | |||||||||
52
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
17.
|
Income taxes
(Continued)
|
Income taxes
differed from the amounts computed by applying the income tax rate of 25% and
social contribution tax rate of 9% to income before income taxes due to the
following:
|
2010
|
2009
|
2008
|
||||||||||
|
Income (loss)
before income taxes
|
684,930 | (417,946 | ) | (60,051 | ) | |||||||
|
Income tax
benefit (expense) at statutory rate — 34%
|
(232,876 | ) | 142,102 | 20,417 | ||||||||
|
Increase
(reduction) in income taxes resulting from:
|
||||||||||||
|
Equity in
earnings of affiliates not subject to taxation
|
(3,486 | ) | 2,083 | (81 | ) | |||||||
|
Tax effect on
tax recovery program Law 11,941/09 and MP 470/09
|
31,635 | - | - | |||||||||
|
Tax loss
carryforwards Law MP 470/09´s write-off
|
20,543 | - | - | |||||||||
|
Nondeductible
goodwill amortization
|
- | (2,621 | ) | (1,952 | ) | |||||||
|
Nondeductible
donations, contributions and others
|
(597 | ) | 3,126 | 1,426 | ||||||||
|
Income tax
(expense) benefit
|
(184,781 | ) | 144,690 | 19,810 | ||||||||
The tax effects of
temporary differences that give rise to significant portions of the deferred tax
assets and deferred tax liabilities at March 31, 2010 and 2009 are presented
below:
|
2010
|
2009
|
|||||||
|
Deferred
tax assets:
|
||||||||
|
Net operating
loss carryforwards
|
166,555 | 123,533 | ||||||
|
Estimated
liability for legal proceedings and labor claims
|
120,857 | 137,965 | ||||||
|
Sale-leaseback
(see Note 21)
|
23,036 | 18,651 | ||||||
|
Other
temporary differences
|
14,458 | 63,906 | ||||||
|
Total gross
deferred tax assets
|
324,906 | 344,055 | ||||||
|
Deferred
tax liabilities:
|
||||||||
|
Deferred tax
liabilities on assigned value of the net assets and temporary
differences:
|
||||||||
|
Property,
plant and equipment
|
(255,011 | ) | (200,729 | ) | ||||
|
Intangibles
|
(197,942 | ) | (77,843 | ) | ||||
|
Exchange
variation
|
(103,003 | ) | - | |||||
|
Tax benefit
on deductible statutory goodwill amortization
|
(130,319 | ) | (50,966 | ) | ||||
|
Other
temporary differences on business acquisition
|
(5,973 | ) | (17,135 | ) | ||||
|
Other
temporary differences
|
(41,490 | ) | (29,668 | ) | ||||
|
Total gross
deferred tax liabilities
|
(733,738 | ) | (376,341 | ) | ||||
|
Net deferred
tax assets/ (liabilities)
|
(408,832 | ) | (32,287 | ) | ||||
|
Recorded as
other current assets / (liabilities)
|
- | 8,090 | ||||||
|
Recorded as
non-current deferred income taxes liabilities
|
(408,832 | ) | (40,377 | ) | ||||
53
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
17.
|
Income taxes
(Continued)
|
In
assessing the valuation allowance of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities and projected future taxable
income in making this assessment. There is no expiration term for the net
operating loss carry forwards. Based upon the level of historical taxable income
and projections for future taxable income over the periods in which the deferred
tax assets are deductible, management believes it is more likely than not that
Cosan will realize the benefits of these deductible differences at March
31, 2010, as well as the net operating loss carry forwards. The amount of
the deferred tax assets considered realizable, however, could be reduced in the
near term if estimates of future taxable income during the carry forward period
are reduced.
As
of March 31, 2010, Cosan and its subsidiaries have consolidated net operating
loss carry forwards for income tax and social contribution tax losses of
US$488,176, and US$495,189, respectively. Income tax losses carry forwards and
social contribution tax losses may be offset against a maximum of 30% of annual
taxable income earned from 1995 forward, with no statutory limitation
period.
Cosan accounts for
unrecognized tax benefits in accordance with ASC 740, “Accounting for Uncertainly in Income
Taxes”. A reconciliation of the beginning and ending amount of
unrecognized tax benefits recorded as noncurrent taxes payable, is as
follows:
A
reconciliation of the beginning and ending amount of unrecognized tax benefits
is as follows:
|
Balance at
May 1, 2008
|
23,656 | |||
|
Increase
through business acquisition
|
34,605 | |||
|
Accrued
interest on unrecognized tax benefit
|
1,534 | |||
|
Settlements
|
(48 | ) | ||
|
Effect of
foreign currency translation
|
(5,752 | ) | ||
|
Balance at
March 31, 2009
|
53,995 | |||
|
Accrued
interest on unrecognized tax benefit
|
(21,177 | ) | ||
|
Effect of
foreign currency translation
|
16,195 | |||
|
Balance at
March 31, 2010
|
49,013 |
54
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
17.
|
Income taxes
(Continued)
|
It
is possible that the amount of unrecognized tax benefits will change in the next
twelve months, however, an estimate of the range of the possible change cannot
be made at this time due to the long time to reach a settlement agreement or
decision with the taxing authorities.
The Company and its
subsidiaries file income tax returns in Brazil and they are subject to income
tax examinations by the relevant tax authorities for the years 2005 through
2010.
|
18.
|
Shareholders’
equity
|
|
|
a.
|
Capital
|
On
November 19, 2007, the Board of Directors approved a capital increase of
US$3,205, through issuance of 922,947 new common shares, with no par value, for
purposes of meeting the needs of the Stock Option Plan, in view of the exercise
of this option by the Company’s officers eligible for such.
At
the Extraordinary General Meeting held on December 5, 2007, a capital increase
of US$967,198 was approved, through issue of 82,700,000 common registered
uncertified shares without par value, by means of private subscription, at the
issue price of US$11.70 each. This capital increase was fully paid-up
on January 23, 2008, as described below.
On
December 11, 2007, the shareholders approved a capital increase of US$134,
through issuance of 38,725 new common shares, with no par value, for purposes of
meeting the needs of the Stock Option Plan, in view of the exercise of this
option by the Company’s officers eligible for such.
On
January 23, 2008, the period for exercising the capital subscription right
ended, as approved in the Extraordinary General Meeting of December 5, 2007. The
parent company, Cosan Limited, subscribed and paid in 56,607,396 common shares
in the amount of US$662,038, followed by subscription and payment by minority
shareholders of 26,092,604 common shares equivalent to US$305,160.
As
a result of the subscription of shares, the parent company now holds 152,939,440
common shares, representing 56.11% of the Company’s capital.
55
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
18.
|
Shareholders’ equity
(Continued)
|
|
|
a.
|
Capital
(Continued)
|
On
April 18, 2008, parent company Cosan Limited announced its acceptance of the
total Company shares of shareholders submitted in connection with the Share
Acquisition Voluntary Public Offering (“OPA – Oferta Pública de Aquisição de
Ações”) through the exchange of BDRs for Class A shares issued by Cosan Limited.
After conclusion of the auction held on that date, 18,232,812 common shares of
the Company, representing 6.7% of its total common shares, were submitted for
exchange. With the OPA, the parent company, Cosan Limited, became the holder of
62.8% of the Company’s total common shares.
On
September 19, 2008, the board of directors approved a capital increase of
US$456,084 through issuance of 55,000,000 previously unissued registered common
shares without par value in a private subscription at an issuance price of
US$8.29 each. The subscribers of each new share also received one Subscription
Warrant (Warrant) which resulted in 55,000,000 Warrants being issued. Each
Warrant grants its holder the right to subscribe 0.6 common shares, with the
distribution of fractional shares not being permitted. Therefore, the Warrants
issued permit the holders to purchase 33,000,000 shares. The Warrants
were valid from their issue date to December 31, 2009. The exercise price of
each amount of Warrants which totals one share is US$8.29 per share. As of
December 31, 2009, 49,987,552 Warrants were exercised, the remaining 12,448
warrants expired.
October 22, 2008
was the deadline to exercise the right of capital subscription, approved in the
meeting of the board of directors on September 19, 2008. Since a large number of
the minority shareholders did not exercise their preemptive rights, Cosan
Limited, the controlling shareholder, subscribed for and paid up 54,993,482
common shares valued at US$456,034, and the minority shareholders subscribed for
and paid up 6,518 common shares, valued at US$50. As a result, Cosan Limited
increased its holding of company’s common shares from 171,172,252 to
226,165,734. This increased their ownership percentage from 62.81% to 69.05% of
the Company’s capital.
On
March 6, 2009, the Board of Directors approved a capital increase of US$1,945
through issuance of 736,852 new common shares, with no par value, for purposes
of meeting the needs of the Stock Option Plan, due to exercise of such options
by qualifying executives.
56
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
18.
|
Shareholders’ equity
(Continued)
|
|
|
a.
|
Capital
(Continued)
|
On
June 18, 2009, the shareholders approved a capital increase of US$169,552
through the issuance of 44,300,389 new common shares, with no par value, for
purposes of the acquisition of Curupay. As part of this acquisition Cosan
acquired noncontrolling interest in Novo Rumo in the amount of US$62,476, which
has been accounted for as an equity transaction, with a dilution of
noncontrolling interest. (Note 8).
On
July 15, 2009, the Board of Directors approved a capital increase of US$6,074
through issuance of 224,819 new common shares, with no par value, for purposes
of meeting the needs of the Stock Option Plan, due to exercise of such options
by qualifying executives.
On
August 7, 2009, the Board of Directors approved a capital increase of US$440
through issuance of 50 new common shares, with no par value, at an issue price
of US$9.00, due to exercise of subscription warrants by the
holders.
On
October 5, 2009, the Board of Directors approved a capital increase of US$1,772
through issuance of 169,500 new common shares, with no par value, for purposes
of meeting the needs of the Stock Option Plan, due to exercise of such options
by qualifying executives.
On
October 29, 2009, the Board of Directors approved a capital increase of
US$236,168 through issuance of 23,753,953 new common shares, with no par value,
at an issue price of US$9.00, due to exercise of subscription warrants by Cosan
Limited, the controlling shareholder. As a result, Cosan Limited increased its
holding of company’s common shares from 226,165,734 to 249,919,687. This
increased their ownership percentage from 60.64% to 62.99% of the Company’s
capital.
On
December 15, 2009, the Board of Directors approved a capital increase of US$830
through issuance of 84,000 new common shares, with no par value, at an issue
price of US$9.00, due to exercise of subscription warrants by the holders. On
the same day, the Board of Directors approved a capital increase of US$6,011
through issuance of 571,194 new common shares, with no par value, for purposes
of meeting the needs of the Stock Option Plan, due to exercise of such options
by qualifying executives.
57
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
18.
|
Shareholders’ equity
(Continued)
|
|
|
a.
|
Capital
(Continued)
|
On
December 22, 2009, the Board of Directors approved a capital increase of
US$78,647 through issuance of 8,072,976 new common shares, with no par value, at
an issue price of US$9.00, due to the exercise of subscription warrants by Cosan
Limited and other holders. Cosan Limited exercised 5,403,560 subscription
warrants which resulted in an issuance of 3,242,136 new common shares and other
holders exercised 8,051,400 subscription warrants which resulted in an issuance
of 4,830,840 new common shares. As a result, Cosan Limited increased its holding
of company’s common shares from 249,919,687 to 253,161,823, which increased
their ownership percentage from 62.89% to 63.19% of the Company’s
capital.
On
December 31, 2009, the Board of Directors approved a capital increase of
US$10,772 through issuance of 1,081,552 new common shares, with no par value, at
an issue price of US$9.00, due to exercise of subscription warrants by the
holders. This decreased Cosan Limited’s ownership percentage from 62.27% of the
Company’s capital.
On
March 29, 2010, the Board of Directors approved a capital increase of US$174
through issuance of 17,000 new common shares, with no par value, for purposes of
meeting the needs of the Stock Option Plan, due to exercise of such options by
qualifying executives.
As
of March 31, 2010, the Company’s capital is represented by 406,560,317 common
shares (328,284,884 as of March 31, 2009), with no par value.
Treasury
stock
Over the year ended
March 31, 2009, the Company acquired 343,139 common shares from dissident
shareholders related to a prior acquisition. These shares are held in
treasury.
58
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
18.
|
Shareholders’ equity
(Continued)
|
|
|
b.
|
Appropriated
retained earnings
|
The Brazilian
Corporate law and Cosan’s by-laws require that annual appropriations be made to
certain reserves (appropriated retained earnings). These comprise mainly 5% of
net income (statutory accounts) that must be transferred to a legal reserve
until such reserve reaches 20% of capital stock under Brazilian GAAP. The legal
reserve can only be used to increase share capital or offset net
losses.
|
|
c.
|
Dividends
|
According to
Cosan’s by-laws, shareholders are entitled to minimum compulsory dividends of
25% of the year’s net income, adjusted in accordance with article 202 of Law
6404/76 (Brazilian Corporate Law). For the year ended March 31, 2010 the minimum
mandatory dividends were calculated as follows:
|
2010
|
||||
|
Net income
under Brazilian GAAP
|
528,611 | |||
|
(Less)
Compensation of accumulated losses
|
(265,608 | ) | ||
|
(Plus)
Foreign exchange gain
|
12,577 | |||
| 275,580 | ||||
|
(Less) Legal
reserve – 5%
|
(13,779 | ) | ||
| 261,806 | ||||
|
Dividends
payable
|
65,451 | |||
Management has also
proposed dividends above the minimum compulsory at the amount of US$46,845 which
is subject to approval by the shareholders.
|
|
d.
|
Retained
earnings
|
Brazilian law
permits the payment of dividends only in reais, limited to the
unappropriated retained earnings of company’s financial statements prepared in
accordance with Brazilian Corporate Law.
The devaluation of
the real impacts the
amount available for distribution when measured in U.S. dollars. Amounts
reported as available for distribution in our statutory accounting records
prepared under accounting principles set forth under Brazilian Corporate Law
will decrease or increase when measured in U.S. dollars as the Real depreciates or
appreciates, respectively, against the U.S. dollar.
59
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
19.
|
Share-based
compensation
|
In
the ordinary and extraordinary general meeting held on August 30, 2005, the
guidelines for the outlining and structuring of a stock option plan for Cosan
officers and employees were approved, thus authorizing the issue of up to 5% of
shares comprising Cosan’s share capital. This stock option plan was outlined to
attract and retain services rendered by officers and key employees, offering
them the opportunity to become shareholders of Cosan. On September 22, 2005,
Cosan’s board of directors approved the distribution of stock options
corresponding to 4,302,780 common shares to be issued or treasury shares held by
Cosan related to 3.25% of the share capital at the time, authorized by the
annual/extraordinary meeting. The remaining 1.75% remained to be distributed. On
September 22, 2005, the officers and key employees were informed regarding the
key terms and conditions of the share-based compensation
arrangement.
According to the
market value on the date of issuance, the exercise price is US$2.64 (two dollars
and sixty four cents) per share which does not include any discount. The
exercise price was calculated before the valuation mentioned above based on an
expected private equity deal which did not occur. Options may be exercised after
a one-year vesting period starting November 18, 2005, at the maximum percentage
of 25% per year of the total stock options offered by Cosan. The options for
each 25% have a five-year period to be exercised.
On
September 11, 2007, the board of directors approved an additional distribution
of stock options, in connection with the stock option plan mentioned above,
corresponding to 450,000 common shares to be issued or purchased by Cosan
related to 0.24% of the share capital at September 22, 2005. The remaining 1.51%
may still be distributed.
On
August 7, 2009, the board of directors approved an additional distribution of
stock options, in connection with the stock option plan mentioned above,
corresponding to 165,657 common shares to be issued or purchased by Cosan. Such
options were issued without a vesting period; therefore, the intrinsic value at
grant date was the basis for calculating the fair value of the options, at
US$9.82 per option, and an expense of US$1,071 was fully recorded by the
Company.
The exercise of
options may be settled only through issuance of new common shares or treasury
shares.
60
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
19.
|
Share-based compensation
(Continued)
|
The employees that
leave Cosan before the vesting period will forfeit 100% of their rights.
However, if the employment is terminated by Cosan without cause, the employees
will have right to exercise 100% of their options of that particular year plus
the right to exercise 50% of the options of the following year.
The fair value of
share-based awards was estimated using a binominal model with the following
assumptions:
|
Options
granted on September 22, 2005
|
Options
granted on September 11, 2007
|
Options
granted on August 7, 2009
|
||||||||||
|
Grant price -
in U.S. dollars
|
3.43 | 3.43 | 3.43 | |||||||||
|
Expected life
(in years)
|
7.5 | 7.5 |
Immediate
|
|||||||||
|
Interest
rate
|
14.52 | % | 9.34 | % | (1 | ) | ||||||
|
Expected
Volatility
|
34.00 | % | 46.45 | % | (1 | ) | ||||||
|
Expected
Dividend yield
|
1.25 | % | 1.47 | % | (1 | ) | ||||||
|
Weighted-average
fair value at grant date - in U.S. dollars
|
6.93 | 10.22 | (1 | ) | ||||||||
|
|
(1)
|
The options
were fully vested at the date of issuance so the fair value was the quoted
market price as of the grant date.
|
Expected Term - Cosan’s
expected term represents the period that Cosan’s share-based awards are expected
to be outstanding and was determined based on the assumption that the officers
will exercise their options when the exercise period is over. Therefore, this
term was calculated based on the average of 5 and 10 years. Cosan does not
expect any forfeiture as those options are mainly for officers, whose turnover
is low.
Expected Volatility – For the options granted on September 22,
2005 Cosan had its shares publicly-traded for less than 6
months as of April 30, 2006. Therefore, Cosan opted to substitute the historical
volatility by an appropriate global industry sector index, based on the
volatility of the share prices, and considering it as an assumption in its
valuation model. Cosan has identified and compared similar public entities for
which share or option price information is available to consider the historical,
expected, or implied volatility of those entities’ share prices in estimating
expected volatility based on global scenarios. For the options granted on
September 11, 2007 Cosan used the volatility of its shares as an assumption in
its valuation model since Cosan’s IPO in Brazil, in 2005.
61
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
19.
|
Share-based compensation
(Continued)
|
Expected Dividends – As the
Company is a relatively new public entity, the expected dividend yield was
calculated based on the current value of the stock at the grant date, adjusted
by the average rate of the return to shareholders for the expected term, in
relation of future book value of the shares.
Risk-Free Interest Rate -
Cosan bases the risk-free interest rate used in the Binominal Model valuation
method on the implied yield currently available on SELIC - Special System
Settlement Custody, which is the implied yield currently available on
zero-coupon securities in Brazil.
As
of March 31, 2010, the amount of US$1,662 related to the unrecognized
compensation cost related to stock options is expected to be recognized in 6
months.
Stock option
activity for the year ended March 31, 2010 and eleven-month period ended March
31, 2009, is as follows:
|
Option
|
Weighted-average
exercise price
|
|||||||
|
Outstanding
as of April 30, 2008
|
2,373,341 | 3.62 | ||||||
|
Exercises
|
(736,852 | ) | 2.64 | |||||
|
Forfeitures
or expirations
|
(165,657 | ) | 2.64 | |||||
|
Outstanding
as of March 31, 2009
|
1,470,832 | 2.64 | ||||||
|
Grants
of options
|
165,657 | 3.43 | ||||||
|
Exercises
|
(982,513 | ) | 3.43 | |||||
|
Outstanding
as of March 31, 2010
|
653,976 | 3.43 | ||||||
|
Shares
exercisable at March 31, 2010
|
408,819 | 3.43 | ||||||
|
Shares
exercisable at March 31, 2009
|
736,852 | 2.64 | ||||||
|
20.
|
Earnings
per share
|
The table below
reconciles weighted average shares outstanding to weighted average shares and
dilutive potential shares outstanding:
|
2010
|
2009
|
2008
|
||||||||||
|
Weighted
average shares outstanding
|
375,973,226 | 300,994,991 | 222,620,060 | |||||||||
|
Effect of
dilutive stock options
|
1,169,417 | * | * | |||||||||
|
Weighted
average shares and dilutive potential shares outstanding
|
377,142,643 | 300,994,991 | 222,620,060 | |||||||||
*
There are no dilutive shares due to a loss during the period
62
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
21.
|
Risk
management and financial
instruments
|
|
|
a.
|
Risk
management
|
The commodity and
foreign exchange rates price volatilities are the main market risks to which
Cosan and its subsidiaries are exposed. Cosan carries out operations involving
financial instruments with a view to managing such risks.
These risks and
related instruments are managed through the definition of strategies,
establishment of control systems and determination of foreign exchange, interest
rate and price change limits.
|
|
b.
|
Price
risk
|
Cosan carries out
transactions involving derivatives, with a view to reducing its exposure to
sugar price variations in the foreign market. Such transactions generally assure
an average minimum income for future production. Cosan actively manages the
positions contracted and relevant results of such activity are continually
monitored, so as to allow that adjustments be made to goals and strategies
considering changes in market conditions. Cosan operates mainly in futures and
options markets on the NYBOT (New York Board of Trade) and the LIFFE (London
International Financial Futures and Options Exchange).
|
|
c.
|
Foreign
exchange risk
|
Cosan carries out
transactions involving derivatives, with a view to reducing its exposure to
foreign exchange rate variations on exports. Foreign exchange derivative
transactions combined with commodity price derivatives generally assure an
average minimum income for future production. Cosan actively manages the
positions contracted and relevant results of such activity are continually
monitored, so as to allow that adjustments be made to goals and strategies
considering changes in market conditions. Cosan operates mainly through futures
contracts over BM&F (“Bolsa de Mercadorias e Futuros de São Paulo”) and in
the over-the-counter segment with leading institutions.
Additionally, Cosan
has also engaged in currency and interest rate swap operations for charges
associated to Senior Notes, from the U.S. dollar exchange rate variation plus
interest of 9% p.a. to 81% of CDI.
63
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
21.
|
Risk management and financial
instruments (Continued)
|
|
|
d.
|
Interest
rate risk
|
Cosan monitors
fluctuations of the several interest rates linked to its monetary assets and
liabilities and, in the event of increased volatility of such rates, it may
engage in transactions with derivatives so as to minimize such risks. During
2010 Cosan entered into swap contracts to exchange fixed to Libor interest rate
in order to protect against variations in the Libor on certain loan
contracts.
|
|
e.
|
Credit
risk
|
A
significant portion of sales made by the Company and its subsidiaries is
intended for a selected group of highly qualified counterparties, such as
trading companies, fuel distribution companies and large supermarket chains. In
connection with the fuel distribution activity, a diversified customer
portfolio, in addition to following up on the sales financing terms by business
segment and their individual credit limits, are procedures adopted by the
Company to minimize overdue accounts receivable and defaults. Credit risk is
managed through specific rules of client acceptance, credit rating and
establishment limits for customer exposure, including, when applicable,
requirement of letters of credit from a top rated bank and obtaining security
interest on credits granted. Management considers that the credit risk is
substantially covered by the allowance for doubtful accounts. The Company and
its subsidiaries historically do not record material losses on trade accounts
receivable.
|
|
f.
|
Debt
acceleration risk
|
As
of March 31, 2010 and 2009, Cosan was a party to loan and financing agreements
with covenants generally applicable to these operations, regarding cash
generation, debt to equity ratio and others. These covenants are
being complied with by Cosan and do not place any restrictions on its operations
as a going-concern.
64
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
21.
|
Risk management and financial
instruments (Continued)
|
|
|
g.
|
Estimated
market values
|
The following
methods and assumptions were used to estimate the fair value of each main class
of financial instruments:
|
|
●
|
Accounts receivable and trade
accounts payable: The carrying amounts reported in the balance
sheet for accounts and notes receivable and accounts payable approximate
their fair values.
|
|
|
●
|
Short-term and long-term debt
and advances from customers: Except when there are published market
prices, the market values of loans and financing were calculated based on
their present value calculated through the future cash flows and using
interest rates applicable to instruments of similar nature, terms and
risks or based on the market quotation of these
securities.
|
The following table
presents the carrying amounts and estimated fair values of Cosan’s financial
instruments at March 31, 2010 and 2009. The fair value of a financial instrument
is the amount at which the instrument could be exchanged in a current
transaction between willing parties.
|
2010
|
2009
|
|||||||||||||||
|
Carrying
amount
|
Fair
value
|
Carrying
amount
|
Fair
value
|
|||||||||||||
|
Financial
assets:
|
||||||||||||||||
|
Cash and cash
equivalents
|
605,483 | 605,483 | 310,710 | 310,710 | ||||||||||||
|
Financial
liabilities:
|
||||||||||||||||
|
Short-term
and long-term debt
|
3,288,546 | 3,181,218 | 1,877,254 | 1,731,727 | ||||||||||||
Assets and
liabilities that are reflected in the accompanying consolidated financial
statements at fair value or have their fair value disclosed in the notes to the
consolidated financial statements are not included in the above disclosures;
such items include derivative financial instruments.
65
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
22.
|
Deferred
gain on sale of investments in
subsidiaries
|
|
|
Agrícola
Ponte Alta S.A. is a subsidiary whose principal assets are land used for
the growing of sugarcane for Cosan. On December 15, 2008, the shareholders
approved a partial spin-off of the assets of Ponte Alta and created four
new subsidiaries. Agricultural land was then transferred from
Ponte Alta to each of the entities. On December 30, 2008, two of the
entities, Nova Agrícola Ponte Alta S.A. and Terras da Ponte Alta S.A. were
sold to Radar, an affiliate company accounted for by the equity method.
The selling price was fair value, US$123,596, which resulted in a gain of
US$47,080. This gain has previously been deferred since there were no
lease contracts executed for the land, which was being used by Cosan for a
monthly fee. Over the year ended March 31, 2009 the lease
contracts were executed, and the gain is being amortized since then to
profit and loss over the 19 year average term of the
leases.
|
|
|
During the
year ended March 31, 2010, the Company has amortized a gain of US$3,394
related to this sale-leaseback
transaction.
|
|
23.
|
Fair
value measurements
|
Effective
May 1, 2008, Cosan adopted ASC 820, Fair Value Measurements (SFAS 157), for
all financial instruments and non-financial instruments accounted for at fair
value on a recurring basis. ASC 820 establishes a new framework for measuring
fair value and expands related disclosures. Broadly, the ASC 820 framework
requires fair value to be determined based on the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly
transaction between market participants. ASC 820 establishes market or
observable inputs as the preferred source of values, followed by assumptions
based on hypothetical transactions in the absence of market inputs.
The valuation
techniques required by ASC 820 are based upon observable and unobservable
inputs. Observable inputs reflect market data obtained from independent sources,
while unobservable inputs reflect market assumptions. These two types of inputs
create the following fair value hierarchy:
Level 1 - Quoted prices for identical instruments in active
markets.
66
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
23.
|
Fair value measurements
(Continued)
|
Level 2 - Quoted prices for similar instruments in active markets;
quoted prices for identical or similar instruments in markets that are not
active; and model-derived valuations whose inputs are observable or whose
significant value drivers are observable.
Level 3 -
Significant inputs to the valuation model are unobservable.
The following
section describes the valuation methodologies Cosan uses to measure different
financial instruments at fair value.
Derivatives
Cosan uses closing
prices for derivatives included in Level 1, which are traded either on exchanges
or liquid over-the-counter markets.
The remainder of
the derivatives portfolio is valued using internal models, most of which are
primarily based on market observable inputs including interest rate curves and
both forward and spot prices for currencies and commodities. Derivative assets
and liabilities included in Level 2 primarily represent interest rate swaps,
foreign currency swaps and commodity forward contracts.
The following table
presents our assets and liabilities measured at fair value on a recurring basis
at March 31, 2010.
|
Level
1
|
Level
2
|
Total
|
||||||||||
|
Assets
|
||||||||||||
|
Derivatives
|
72,239 | 57,217 | 129,456 | |||||||||
|
Liabilities
|
||||||||||||
|
Derivatives
|
(29,130 | ) | (13,937 | ) | (43,067 | ) | ||||||
67
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
24.
|
Segment information
(Continued)
|
|
a.
|
Segment
information
|
The following
information about segments is based upon information used by Cosan’s senior
management to assess the performance of operating segments and decide on the
allocation of resources. Cosan’s operating and reportable segments are business
units in Brazil that target different industry segments. Each reportable segment
is managed separately because of the need to specifically address customer needs
in these different industries. The operations of these segments are based solely
in Brazil.
In
2010, in connection with some management changes and realignment of the
business, management has combined the Sugar and Ethanol segments into the Sugar
and Ethanol (S&E) segment. This change reflects the manner in
which the Chief Operating Decision Maker evaluates the business and allocates
resources. The S&E segment mainly operates and produces a broad variety of
sugar and ethanol products. These products are produced in the same
facilities using the same basic raw material – sugarcane. The plants
have the flexibility of being configured to produce either of the two finished
products which provides management the ability to adjust production based on
market demand. Disclosures relating to this operating segment also include the
revenues of the two major products. The prior year amounts have been
reclassified to reflect the combination of the Sugar and Ethanol
Segments.
Additionally, the
current year acquisition of Teaçú and Curupay and their combination with the
Novo Rumo business has resulted in a new operating segment that is called Sugar
Logistics (RUMO).
Following is a
description of the operating segments of the business.
68
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
24.
|
Segment information
(Continued)
|
|
a.
|
Segment
information (continued)
|
The Sugar and
Ethanol (“S&E”) segment produces and sells a broad variety of sugar and
ethanol products.
The sugar products
include raw (also known as very high polarization - VHP sugar), organic, crystal
and refined sugars, which are sold to a wide range of customers in Brazil and
abroad. Cosan exports the majority of the sugar produced through international
commodity trading companies. Cosan’s domestic customers include wholesale
distributors, food manufacturers and retail supermarkets, through which it sells
its “Da Barra” and “União” branded products. The ethanol products
include fuel ethanol and industrial ethanol. Cosan’s principal fuel ethanol
products are hydrous and anhydrous. Hydrous ethanol is used as an automotive
fuel and anhydrous (which has a lower water content than hydrous ethanol) is
used as an additive in gasoline. The fuel ethanol products are mainly
sold in the domestic market by fuel distribution companies. Consumption of
hydrous ethanol in Brazil is increasing as a result of the introduction of flex
fuel vehicles that can run on either gasoline or ethanol (or a combination of
both). In addition, S&E segment sells also liquid and gel ethanol
products used mainly in the production of paint and cosmetics and alcoholic
beverages for industrial clients in various sectors. The S&E segment
includes also the co-generation activities and most of corporate
activities.
The Fuel
Distribution and Lubricants (“CCL”) segment is engaged in the distribution in
Brazil of fuel products, derived from petroleum or ethanol, and lubricants as
well as the operation of convenience stores. The network to which the fuel
distribution segment distributes such products is comprised of approximately
1,700 fuel stations.
The Sugar Logistics
(“Rumo”) segment provides logistics services for the transport, storage and port
lifting of sugar for both the S&E segment and third parties.
The accounting
policies underlying the financial information provided for the segments are
based on Brazilian GAAP. We evaluate
segment performance based on information generated from the statutory accounting
records.
69
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
24.
|
Segment information
(Continued)
|
|
a.
|
Segment
information (continued)
|
Segment profit and
loss and selected balance sheet data under Brazilian GAAP is as
follows:
|
2010
|
||||||||||||||||||||
|
S&E
|
CCL
|
Rumo
|
Adjustments
/ eliminations (1)
|
Consolidated
|
||||||||||||||||
|
Brazilian
GAAP
|
US
GAAP
|
|||||||||||||||||||
|
Balance
sheet:
|
||||||||||||||||||||
|
Property,
plant & equipment (PP&E)
|
2,775,752 | 199,983 | 165,094 | 856,986 | 3,997,815 | |||||||||||||||
|
Intangible
assets
|
735,198 | 774,716 | 38,824 | (948,165 | ) | 600,573 | ||||||||||||||
|
Loans, net of
cash equivalents
|
(2,443,354 | ) | (249,839 | ) | (59,799 | ) | 69,929 | (2,683,063 | ) | |||||||||||
|
Other assets
net of other liabilities
|
2,113,306 | 342,720 | 7,696 | (912,642 | ) | 1,551,080 | ||||||||||||||
|
Total
net assets
|
3,180,903 | 1,067,579 | 151,815 | (933,892 | ) | 3,466,405 | ||||||||||||||
|
Income
statement (12 months):
|
||||||||||||||||||||
|
Net
sales
|
2,882,935 | 5,436,199 | 84,797 | (120,780 | ) | 8,283,151 | ||||||||||||||
|
Gross
profit
|
703,108 | 412,866 | 22,896 | (74,746 | ) | 1,064,124 | ||||||||||||||
|
Selling,
general and administrative expenses (SG&A)
|
(455,906 | ) | (264,081 | ) | (9,705 | ) | (8,942 | ) | (738,634 | ) | ||||||||||
|
Other income
(expenses)
|
167,293 | 9,071 | 2,149 | 685 | 179,198 | |||||||||||||||
|
Other
selected data:
|
||||||||||||||||||||
|
Additions to
PP&E (“Capex”)
|
948,838 | 49,579 | 83,067 | - | 1,081,484 | |||||||||||||||
|
Depreciation
and amortization
|
313,324 | 20,067 | 7,591 | 144,916 | 485,898 | |||||||||||||||
(1) Refers to the
consolidation eliminations and adjustments to US GAAP
70
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
24.
|
Segment information
(Continued)
|
|
a.
|
Segment
information
(continued)
|
|
2009
|
||||||||||||||||||||
|
S&E
|
CCL
|
Rumo
|
Adjustments
/ eliminations (1)
|
Consolidated
|
||||||||||||||||
|
Brazilian
GAAP
|
US
GAAP
|
|||||||||||||||||||
|
Balance
sheet:
|
||||||||||||||||||||
|
Property,
plant & equipment (PP&E)
|
1,330,266 | 128,712 | 29,414 | 613,395 | 2,101,787 | |||||||||||||||
|
Intangible
|
423,571 | 966 | (183,186 | ) | 241,351 | |||||||||||||||
|
Loans, net of
cash equivalents
|
(1,122,560 | ) | 39,663 | 4,811 | (488,458 | ) | (1,566,544 | ) | ||||||||||||
|
Other assets
net of other liabilities
|
2,943,642 | (78,223 | ) | (1,469 | ) | (1,917,548 | ) | 946,402 | ||||||||||||
|
Total net
assets
|
3,574,919 | 91,118 | 32,756 | (1,975,797 | ) | 1,722,996 | ||||||||||||||
|
Income
statement (11 months):
|
||||||||||||||||||||
|
Net
Sales
|
1,561,118 | 1,549,359 | 26,862 | (210,879 | ) | 2,926,460 | ||||||||||||||
|
Gross
profit
|
297,183 | 94,719 | 6,877 | (90,196 | ) | 308,583 | ||||||||||||||
|
Selling,
general and administrative expenses (SG&A)
|
(264,947 | ) | (85,577 | ) | (2,866 | ) | 3,861 | (349,529 | ) | |||||||||||
|
Other income
(expenses)
|
93,529 | 779 | 5,387 | (101,984 | ) | (2,289 | ) | |||||||||||||
|
Other
selected data:
|
||||||||||||||||||||
|
Addition to
PP&E (“Capex”)
|
574,112 | 4,881 | 2,433 | - | 581,426 | |||||||||||||||
|
Depreciation
and amortization
|
203,832 | 6,299 | 2,946 | 75,583 | 288,660 | |||||||||||||||
(1) Refers to the
consolidation eliminations and adjustments to US GAAP
|
2008
|
||||||||||||||||||||
|
S&E
|
CCL
|
Rumo
|
Adjustments
/ eliminations (1)
|
Consolidated
|
||||||||||||||||
|
Brazilian
GAAP
|
US
GAAP
|
|||||||||||||||||||
|
Income
statement (12 months):
|
||||||||||||||||||||
|
Net
Sales
|
1,482,573 | - | 28,159 | (19,499 | ) | 1,491,233 | ||||||||||||||
|
Gross
profit
|
189,048 | - | 3,176 | (45,835 | ) | 146,389 | ||||||||||||||
|
Selling,
general and administrative expenses (SG&A)
|
(276,995 | ) | - | (4,139 | ) | (920 | ) | (282,054 | ) | |||||||||||
|
Other income
(expenses)
|
2,712 | - | (948 | ) | (5,434 | ) | (3,670 | ) | ||||||||||||
(1) Refers to the
consolidation eliminations and adjustments to US GAAP
71
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
24.
|
Segment information
(Continued)
|
|
b.
|
Detailed
net sales per segment
|
|
2010
|
2009
|
2008
|
||||||||||
|
S&E
(Brazilian GAAP)
|
||||||||||||
|
Sugar
|
1,810,005 | 900,424 | 781,809 | |||||||||
|
Ethanol
|
936,473 | 586,633 | 612,397 | |||||||||
|
Cogeneration
|
50,146 | 7,532 | - | |||||||||
|
Other
|
86,311 | 66,529 | 88,367 | |||||||||
| 2,882,935 | 1,561,118 | 1,482,573 | ||||||||||
|
CCL
(Brazilian GAAP)
|
||||||||||||
|
Fuels
|
5,056,969 | 1,443,537 | - | |||||||||
|
Lubricants
|
339,752 | 92,969 | - | |||||||||
|
Other
|
39,478 | 12,853 | - | |||||||||
| 5,436,199 | 1,549,359 | - | ||||||||||
|
Rumo
(Brazilian GAAP)
|
||||||||||||
|
Port
lifting
|
76,155 | 26,862 | 28,159 | |||||||||
|
Transports
|
8,642 | - | - | |||||||||
| 84,797 | 26,862 | 28,159 | ||||||||||
|
Adjustments /
eliminations
|
(120,780 | ) | (210,879 | ) | (19,499 | ) | ||||||
|
Total (US
GAAP)
|
8,283,151 | 2,926,460 | 1,491,233 | |||||||||
|
c.
|
Net
Sales by region
|
The percentage of
net Sales by geographic área are as follows:
|
2010
|
2009
|
|||||||
|
Brazil
|
86.4 | % | 73.6 | % | ||||
|
Europe
|
9.2 | % | 18.5 | % | ||||
|
Latin
American (except Brazil)
|
2.8 | % | 5.0 | % | ||||
|
Middle east
and Asia
|
1.2 | % | 1.9 | % | ||||
|
North
America
|
0.3 | % | 0.9 | % | ||||
|
África
|
0.1 | % | 0.1 | % | ||||
|
Total
|
100.0 | % | 100.0 | % | ||||
72
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
consolidated financial statements (Continued)
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
24.
|
Segment information
(Continued)
|
|
d.
|
Concentration
of clients
|
S&E
There are several
clients in this segment, one of which represents more than 10% of the segment
net sales -- the SUCDEN Group (17% in 2010 and 14% in 2009).
CCL
In
this segment there are no clients that represent more than 10% of the net
sales.
e.
Concentration of clients
Rumo
In
2010 33% of the segment net sales were generated from sales to the S&E
segment (52% in 2009). There two other customers which represented more than 10%
of the net sales of this segment. SUCDEN Group accounted for 16% of
segment sales (14% in 2009) and the ED&F Man Group accounted for 14% (no
sales in the previous year).
73
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
Cosan
S.A. Industria e Comércio
MANAGEMENT
REPORT
March 31,
2010
In compliance with
legal and statutory provisions, Cosan S.A. Indústria e Comércio submits for
appreciation by its shareholders the Management Report and relevant Financial
Statements, together with the Opinion of the Independent Auditors, relative to
the fiscal years ended March 31, 2010 and 2009, prepared in accordance with
accounting practices adopted in Brazil. The Financial Statements prepared
according to generally accepted accounting principles of the United States of
America (US GAAP), expressed in U.S. dollars, are available in the Investors
Relations section of our site www.cosan.com.br. The Company
also makes available a detailed version of the Financial Statements and its
release on results on site www.cosan.com.br/ri.
On account of the
alteration of fiscal year 2009, which brought forward its closing date to March
31, 2009, the periods for fiscal years 2009 and 2010 are mismatched, i.e.,
fiscal year 2009 consists of only 11 months, for the interval from May 2008 to
March 2009, while fiscal year 2010 comprises the 12 months from April 2009 to
March 2010;
MESSAGE
FROM MANAGEMENT
This fiscal year
was marked by the consolidation and alteration of the strategy of
diversification of the business model implemented in the previous year. After
more than one year since the acquisition of Esso Brasileira de Petróleo
(presently named CCL – Cosan Combustíveis e Lubrificantes S.A.) we can present
the results obtained and the benefits secured from implementation of a new
fully-integrated business platform. With the well-defined and solid business
model, Cosan has positioned itself to capture any opportunities that could arise
and to differentiate itself from competitors through its competitive
edges.
With a vision of
growth, but without losing focus on sustainability, in these six months Cosan
has been able to (i) increase its crushing capacity with the acquisition of
NovAmérica (currently named CAL – Cosan Alimentos) and the start-up of the
greenfield
1
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
projects (Jataí and
Caarapó), (ii) advance in its plan of investment in co-generation of energy
using cane bagasse, (iii) increase its presence in the logistics segment, with
the creation and commencement of activities of Rumo Logística, and (iv) through
execution of a non-binding memorandum of understanding with Shell, thereby
enabling itself to become the most efficient player in the distribution of fuel
in Brazil.
The acquisition of
the Cosan Alimentos mills in the first quarter of 2010 increased our crushing
capacity by 10 million tons of cane, provided better exposure to the domestic
sugar market, principally with the portfolio of the UNIÃO brand, in a year when
sugar attained historical record prices. In addition, Cosan also acquired
NovAmérica’s participation of 28.2% at Rumo Logística, increasing its stake to
approximately 93%.
The energy
co-generation project continued to be implemented in the course of this fiscal
year, so that the next crop year can be initiated with the new co-generation
units ready to commence sale of energy through contracts that have been
executed. These new units are expected to more than double the generation of
cash in the co-generation segment, which will help to reduce the volatility of
our future sugar and ethanol – CAA - results, increasing their
predictability.
The process of
organic growth initiated with the construction of a new mill, Jataí, in the
State of Goiás, showed Cosan’s capability of expanding sugarcane frontiers
beyond the State of São Paulo, with state-of-the- art and modern technology and
with efficiency well above the national average. Cosan also concluded the
Greenfield acquired from NovAmérica, located in the city of Caarapó, in the
State of Mato Grosso do Sul.
The new business,
named Rumo Logística, positions Cosan as the principal sugar logistics player in
Brazil. In addition to coping with one of the main infrastructure bottlenecks in
Brazil, Cosan will be able to offer a service with quality, efficiency and
competitive costs to all Brazilian sugar producers, through a partnership with
ALL in rail transportation of bulk sugar and other sub-products. The new
railcars and locomotives purchased by Rumo Logística are among the most modern
in the world and will be able to carry up to approximately 11 million tons of
sugar, when the expected investments are completed in 2013.
The signing of the
memorandum of understanding between Cosan and Shell demonstrates that we are
following the correct strategy. The new joint venture (“JV”) still needs to have
2
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
its terms approved
and defined by both companies and by the pertinent regulating agencies, in
addition to completion of the due diligence process by both parties. The
businesses in which Cosan operates and that will be part of the Joint Venture
are sugar and ethanol, including operations of energy co-generation,
distribution and commercialization of fuel, the ethanol logistics assets and the
totality of its equity participation in a company that commercializes ethanol,
totaling assets to be contributed estimated at US$4,925 million. Cosan will
contribute to the JV net debts amounting to approximately US$2,524 million. In
consideration, Shell will contribute to the JV its fuel distribution and
commercialization assets in Brazil (retail and aviation) and its participation
in companies involved with research and development of use of biomass, including
ethanol. Furthermore, Shell will effect within two years a cash capital
contribution amounting to approximately US$1,625 million and a contingent
contribution estimated by Cosan at US$300 million, in the course of a period of
approximately 5 years, on account of additional input based on future earnings
of the joint structure.
The challenges for
the next fiscal year are even greater, principally after closing of the joint
venture with Shell. The new integration and management processes will capture
major synergies in all of our business units. The quest for an even more
efficient company that can assure its sustainable growth, providing increasingly
cleaner energy for people’s lives will continue to guide us throughout the next
year.
Market
and Sector Overview
According to UNICA,
the sugarcane growers’ association, crushed cane volume in Brazil’s
central-south region totaled 541.9 million tonnes in the 2009/10 crop, 7.3% up
compared to the previous harvest. Sugar production increased by 7.3% to reach
28.6 million tonnes, while ethanol output dropped by 5.6% to 23.7 billion
liters, of which hydrous ethanol accounted for 17.5 billion liters and anhydrous
ethanol for 6.2 billion liters, an increase of 3.8% and decrease of 24.8%,
respectively, in relation to the previous harvest. This reflects the crop
shortfall due to record level of rains during the crop, when the weather is
usually dry, which not only decreased the number of crushing days but also the
sucrose content of the total sugar recoverable (TSR) in the cane to 130.25 kg/t,
compared to 140.88 kg/t in the previous harvest. In addition, due to increase in
sugar prices in the international market during the crop, the production mix
continued to prioritize sugar (42.6%) compared to the previous
year.
3
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
UNICA estimates
that the total crushed cane volume for the 2010/11 crop will reach 595.9 million
tonnes in Brazilian Central-South region, which, combined with an improve of TSR
to 138.59 kg/t and 43.29% of cane towards sugar production, maintaining the
production mix more focused on sugar compared to last year’s, will result in
34.1 million tonnes of sugar, 20.1 billion liters of hydrous ethanol and 7.3
billion liters of anhydrous ethanol, an increase of 19.1%, 15.4% and 16.2%,
respectively. These projections are mainly the result of (i) greater
agricultural productivity (tonnes of cane / hectare) due to the higher level of
rains during the planting and growth of sugarcane, despite such adverse effects
as the orange rust of sugarcane, which may affect certain cane varieties and the
aging of the field; (ii) higher yield of sucrose (TSR) in the cane as a result
of a more favorable weather conditions for harvesting and maturing of the cane,
despite the higher volume of cane left on the field, anticipation of the
beginning of harvest and the evolution of mechanical harvesting; and the (iii)
increase in crushing capacity as result of the startup of 10 new mill units and
ramp-up of the harvesting area of those that started operating in the previous
harvests, effect that started to vanish due to the lower investment level
compared to the peak in 2007 and 2008 in the sector.
The latest UNICA
data indicate an increase of crushed cane volume in beginning of 2010/11 crop,
until May 16th, totaling 93.9 million tones, 27.1% higher on the same period in
the last crop, mainly due to the advance of sugarcane harvest. The production
mix in the period continues to prioritize sugar to attend the contracts which
could not be performed last year, being 41.9% of production directed to this
product and 58.1% for ethanol. Sugar production reached 4.4 million tonnes, an
increase of 38.7% than last crop, while ethanol output stood at 3.8 billion
liters, with 2.9 billion liters of hydrous ethanol and 829 million liters of
anhydrous ethanol, an increase of 11.5% and 74.6%, respectively.
In this quarter,
raw sugar prices averaged 24.52 US¢/lb, 92.8% up over 4Q09 and 3.6% up over
3Q10. It is important to note the variation of prices in the period: after
rallying in January, when sugar price reached 29.9 US¢/lb, the highest in 29
years, prices dropped by 44.5% until the end of the quarter. The downward trend
continued, reaching the lowest point of 13.67 US¢/lb in the beginning of May,
54.3% down from the peak in January.
This can be
explained by some factors: (i) export of 500,000 tonnes of out-of-quota sugar to
the European Union, as mentioned in the last Financial Letter; (ii) export of
nearly 1 million tonnes of sugar from Brazil in the quarter, which was not
expected by the market based on the estimates of initial inventories for the
harvest; (iii) the recovery and extension of the Indian crop, which usually ends
in March and was estimated between 13 and 15 million
4
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
tonnes. In May,
there were still several mills processing cane, with new estimates between 18
and 19 million tonnes; (iv) the deferral of demand in response to the higher
prices; (v) the prospect of better weather conditions for the 2010/11 crop in
Brazil and India, resulting in more optimistic sugar production estimates
ranging from 32-35 to 24-25 million tonnes, respectively.
On the other hand,
world sugar inventories are much lower compared to historical levels and need to
be recomposed. Moreover, there are several uncertainties concerning the crop in
some countries, for example: (i) in Brazil and India, if the weather conditions
are not as adequate as expected, production will be lower than expected; (ii)
the announcement by the Pakistani government of its intention to buy
approximately 900,000 tonnes; (iii) potential imports from China to recompose
strategic inventories, given that these were released to curb inflation in the
domestic market after a bad crop; (iv) the possibility that the United States
will allow additional raw sugar imports to meet domestic demand.
International
refined sugar prices partially followed the downward trajectory of raw sugar
prices, dropping by 37.6% in 61 days. The average price in the period was
US$659.15/t, 75.5% and 7.4% up over 4Q09 and 3Q10, respectively. Due to the lack
of sugar for refining, mainly because Brazil is in the inter-harvest period, the
white premium averaged US$118.58/t.
In 4Q10, the
Brazilian real depreciated against the U.S. dollar to average R$1.80/US$, 3.6%
up from the previous quarter. In the quarter, the Real reached R$1.87/US$, due
to the initial signs of an economic slowdown in Portugal, Italy, Greece and
Spain. The foreign exchange rate at the end of the period was R$1.78/US$,
compared with R$1.74/US$ in December 2009 and R$2.32/US$ in March
2009.
Domestic crystal
sugar prices (ESALQ) averaged R$70.80/50Kg bag (or 35.65 US¢/lb) in 4Q10, 22.8%
up compared to the previous quarter and 63.7% up on 4Q09. These prices reflect
the lower sugar availability due to the rainy season and strong exports during
the harvest, which amounted to 19.8 million tonnes (from April/09 to
March/10).
In response to the
previously mentioned factors and the macroeconomic conditions, major hedge
funds, plus smaller funds and speculators, who had built positions in the
commodity due to its solid fundamentals, quickly reduced their long sugar
positions, helping with the decline in sugar prices. At the end of 4Q10, the net
long position stood at 158,000 lots, or 15.8% of open contracts, 30.2% down from
the previous quarter.
5
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
In the domestic
market, the lower availability of ethanol due to the accelerated demand in 2009
(increase in flex fuel cars sales) and the reduced supply due to the rainy
harvest, resulted in a significant increase in prices of both anhydrous and
hydrous ethanol. Hydrous ethanol prices (ESALQ) averaged R$1.041/liter in 4Q10,
40.8% up YoY and 9.7% up over 3Q10. Anhydrous prices averaged R$1.188/liter,
43.1% higher than 3Q09 and 8.6% up on the previous quarter.
According to
Brazil’s National Petroleum Agency (ANP), the average hydrous ethanol/gasoline
price parity (weighted by the size of the fleet) closed 69% at the end of 4Q10,
returning to below 70% parity in 6 states, which account for more than 50% of
Brazil’s flex-fuel fleet. Between February and May 1st, 2010, the anhydrous
ethanol blend ratio in gasoline reduced from 25% to 20%, yet anhydrous ethanol
consumption remained unchanged compared to February and March 2009, once
gasoline consumption increased significantly as ethanol prices were above parity
during most of the period.
According to
ANFAVEA, the auto manufacturers’ association, flex-fuel vehicle sales in Brazil
totaled 652,700 units in 4Q10, accounting for 87% of new car sales, 16.1% up
year-on-year.
According to
ANP, Diesel sales in the first three months of 2010 totaled 11.1 billion liters,
12.7% up year-on-year. Gasoline A volume increased by a significant 29.7% in the
period, with 5.9 billion liters sold, as ethanol prices were above parity and
percentage of anhydrous ethanol blended in gasoline decreased. For these same
reasons, ethanol consumption dropped by 24.7% in the period to reach 2.8 billion
liters.
Operating
Performance
EBITDA per Business
Unit
6
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
|
EBITDA
(R$ MM) - FY'10
|
CAA
|
Rumo
|
CCL
|
Total*
|
||||||||||||
|
Net
Revenues
|
5,380.1 | 158.2 | 10,145.1 | 15,336.1 | ||||||||||||
|
(-) Cost of Product Sold /
Services Rendered
|
(4,068.0 | ) | (115.5 | ) | (9,374.6 | ) | (13,210.7 | ) | ||||||||
|
(=) Gross
Profit
|
1,312.1 | 42.7 | 770.5 | 2,125.4 | ||||||||||||
|
Gross
Margin
|
24.4 | % | 27.0 | % | 7.6 | % | 13.9 | % | ||||||||
|
(-) Selling Expenses
|
(464.5 | ) | - | (400.1 | ) | (864.6 | ) | |||||||||
|
(-) General and Administrative
Expenses
|
(386.3 | ) | (18.1 | ) | (92.7 | ) | (497.2 | ) | ||||||||
|
(-) Other Operating
Revenues
|
312.2 | 4.0 | 16.9 | 333.1 | ||||||||||||
|
(+) Depreciation and
Amortization
|
584.7 | 14.2 | 37.5 | 636.3 | ||||||||||||
|
(=)
EBITDA
|
1,358.3 | 42.8 | 332.0 | 1,733.1 | ||||||||||||
|
EBITDA
Margin
|
25.2 | % | 27.0 | % | 3.3 | % | 11.3 | % | ||||||||
|
(=)
EBITDAH
|
1,689.2 | 41.8 | 332.0 | 2,063.0 | ||||||||||||
|
EBITDAH
Margin
|
31.4 | % | 26.4 | % | 3.3 | % | 13.5 | % | ||||||||
* Total excludes
consolidation
7
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
Net
Revenue
|
4Q'09
|
4Q'10
|
Sales
Composition (R$MM)
|
FY'09
|
FY'10
|
|||||||||||
| 2,349.8 | 4,394.1 |
Net Operating
Revenue
|
6,270.1 | 15,336.1 | |||||||||||
| 853.7 | 1,850.2 |
CAA
|
3,129.6 | 5,380.1 | |||||||||||
| 502.4 | 1,215.5 |
● Sugar
Revenue - CAA
|
1,805.1 | 3,377.8 | |||||||||||
| 64.1 | 347.7 |
Local
|
233.8 | 1,062.3 | |||||||||||
| 438.2 | 867.8 |
Export
|
1,571.3 | 2,315.5 | |||||||||||
| 337.5 | 602.1 |
● Ethanol
Revenue - CAA
|
1,176.0 | 1,747.6 | |||||||||||
| 257.8 | 549.7 |
Local
|
775.1 | 1,325.9 | |||||||||||
| 79.8 | 52.4 |
Export
|
401.0 | 421.8 | |||||||||||
| 3.6 | 5.7 |
● Energy
Cogeneration - CAA
|
15.1 | 92.4 | |||||||||||
| 10.3 | 26.8 |
● Other Revenue - CAA
|
133.4 | 162.2 | |||||||||||
| 9.7 | 38.3 |
Rumo
|
53.9 | 158.2 | |||||||||||
| 9.7 | 24.9 |
● Loading
|
53.9 | 142.1 | |||||||||||
| - | 13.4 |
● Transportation
|
- | 16.1 | |||||||||||
| 1,505.7 | 2,588.7 |
CCL
|
3,106.0 | 10,145.1 | |||||||||||
| 1,393.7 | 2,401.6 |
● Fuels Revenue - CCL
|
2,893.9 | 9,437.3 | |||||||||||
| 106.3 | 170.4 |
Ethanol
|
220.6 | 757.0 | |||||||||||
| 594.6 | 1,208.6 |
Gasoline
|
1,267.0 | 4,111.0 | |||||||||||
| 588.1 | 999.3 |
Diesel
|
1,156.3 | 4,338.5 | |||||||||||
| 104.7 | 23.3 |
Other
|
250.0 | 230.9 | |||||||||||
| 98.2 | 168.9 |
● Lubes Revenue - CCL
|
186.4 | 634.0 | |||||||||||
| 13.8 | 18.1 |
● Other Revenue - CCL
|
25.8 | 73.7 | |||||||||||
| (19.3 | ) | (83.0 | ) |
Eliminations
from Consolidation
|
(19.3 | ) | (347.4 | ) | |||||||
Net revenue totaled
R$15.3 billion in FY’10, versus R$6.3 billion in the previous year. CCL
accounted for most of this figure, contributing R$10.1 billion, or 66.2% of the
total. CAA’s revenue, which grew by 71.9% to R$5.4 billion, was fueled by the
merger of NovAmérica, higher sugar prices and the start-up of the co-generation
projects.
8
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
Net
Operating Revenue (R$ million)
Sugar
Sales - CAA
Sugar sales totaled
R$3.4 billion, 87.1% more than the year before. The main factors contributing to
the R$ 1.6 billion increase were:
|
|
Þ
|
Record
international and domestic prices, 28.9% and 54.4% above previous year
which have contributed with gains of approximately R$ 453.5 million and R$
127.3 million, respectively;
|
|
|
Þ
|
The
higher sugar volume sold, resulted in an additional revenues of
R$640.5 million. This increase in volume can be explained by: (i)
NovAmerica consolidation; (ii) the higher share of sugar in the product
mix; (iii) the reduction in carryover stocks; and (iv) the distortion in
the comparison with the previous year, which had only 11
months.
|
9
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
Sugar
Volume
(thousand tonnes) and Average Unit Price (R$/tonne)
The sugar
inventories in FY’10 were 49.0% lower compared to the previous year, reflecting
the commercial strategy adopted to capture the higher prices over the last
quarter.
Sugar
Inventories
|
4Q'09
|
4Q'10
|
|
|
'000 ton
|
266.4
|
135.8
|
|
R$'MM
|
109.3
|
93.6
|
|
R$/ton
|
410
|
689
|
10
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010Ethanol
Sales – CAA
Ethanol revenue
totaled R$1.7 billion, 48.6%, or R$ 571.6 million, up on FY’09, mainly due
to:
|
|
Þ
|
Gain of
R$513.2 million from higher ethanol sales, thanks to: (i) the
incorporation of NovAmérica’s plants; (ii) the reduction in carryover
stocks, taking advantage of the higher inter-harvest prices;
(iii) the effect from the comparison with FY’09, which had only 11
months;
|
|
|
Þ
|
Gain of
R$40.7 million due to the increase in domestic average prices,
notwithstanding the 18.3% decrease in the international average
prices;
|
|
|
Þ
|
Loss of
R$78.0 million due to higher exports, whose average prices were lower than
domestic ones.
|
11
COSAN
S.A. INDUSTRIA E COMERCIO
Ethanol
Volume
(million liters) and Average Unit Price (R$/thousand
liters)
Ethanol inventories
were 76.2% lower than in the previous year due to our strategy to capture the
higher prices over the off-season period (4Q’10).
Ethanol Inventories
|
4Q'09
|
4Q'10
|
|
|
'000 cbm
|
287.2
|
68.2
|
|
R$'MM
|
201.0
|
56.2
|
|
R$/cbm
|
700
|
824
|
12
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
Energy
co-generation – CAA
|
|
Þ
|
Energy
revenue totaled R$92.4 million, thanks to growing investments in
co-generation, which are expected to continue recording strong growth in
the coming years. FY’10 was marked by the beginning of energy delivered by
Serra, Gasa, Costa Pinto, Tarumã and Maracaí accordingly to the bi-lateral
sales contracts and/or auctioned electricity sale contracts. Sales volume
totaled 596MWh, at an average of
R$141.6/MWh.
|
Electricity
Sales
Volume
(thousand MWh) and Average Unit Price (R$/MWh)
Other
Products and Services – CAA
Despite the fact
that revenue from loading services and electricity sales were no longer
considered under CCA’s “Other products and services”, revenue from this line
still grew by 21% chiefly due to sales of molasses, fusel oil and
sugarcane.
13
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
Rumo
In FY’10, Rumo
concluded its first year jointly operating the Cosan Portuária and Teaçú
terminals and began transportation operations through a partnership agreement
with ALL, with total net revenues of R$158.2 million. Loading volume grew by
131.4% over FY’09, from 3.5 million to 8.1 million tonnes, 34.6% of which (or
2.8 million tonnes) being service to Cosan. This result was achieved because of
the merger with Teaçú, NovAmérica’s former terminal, and higher productivity due
to synergies and improvements in operational processes.
The average loading
price increased by 13.0% over FY’09 to R$17.50/ton.
The transportation
agreement entered into with ALL became valid and executable in 4Q’10, generating
additional revenue of R$16.1 million in this quarter.
Loading
Volume
Volume
(million tonnes) and Average Unit Price (R$/tonne)
14
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
Fuel
Sales – CCL
CCL’s recorded
FY’10 net revenue of R$ 10.1 billion, 226.6% up on the previous year, given that
only four months of this company’s results were consolidated in FY’09, as
mentioned previously. Fuel segment revenue totaled R$ 9.4 billion, up by 226.1%.
The main factors contributing to the net revenues achieved in FY’10
were:
|
|
Þ
|
Ethanol sales
of 803.2 million liters, reflecting record vehicle licensing volume
between April 2009 and March 2010, 88% of which flex-fuel
vehicles;
|
|
|
Þ
|
Higher
ethanol prices in the inter-harvest period, which not only benefited
hydrous net revenue, but also resulted in an upturn in gasoline sales
volume. This was because ethanol prices were above 70% parity with
gasoline prices in many Brazilian sates, causing some flex-fuel owners to
switch from ethanol to gasoline, whose prices are higher (average of
R$2,207/m3 in FY’10 versus R$942/m3 of
ethanol);
|
|
|
Þ
|
The
acquisition of new corporate clients, who accounted for an additional 210
million liters of Diesel in FY’10, beyond the Diesel volume sold to
CAA.
|
15
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
Fuel
Volume
(million liters) and Average Unit Price (R$/thousand
liters)
16
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
Lubricant
Sales – CCL
Lubricant sales
totaled R$634 million, thanks to the increased share of higher added-value
products in the sales mix and the upturn in market share.
Lubricants
Volume
(million liters) and Average Unit Price (R$/thousand liters)
CCL
Inventories
(Including
Fuels and Lubricants)
|
4Q'09
|
4Q'10
|
|
|
'000 cbm
|
138.5
|
137.5
|
|
R$'MM
|
274.4
|
266.5
|
|
R$/cbm
|
1,981
|
1,938
|
17
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
Cost of Goods Sold
(COGS)
COGS totaled R$13.2
billion, versus R$5.5 billion in the previous year. This substantial upturn
reflected the 12-month consolidation of fuel and lubricant distribution, which
added R$ 9.4 billion to annual COGS, versus R$2.9 billion in the previous year,
when only four months of this business unit were consolidated. In addition,
CAA’s COGS increased by 60.5%, chiefly due to higher sales volume, sugar
sourcing activities, higher costs for sugar cane acquired from third parties,
the poor harvest and the reduction in TRS, the last two due to excess rainfall
in the harvest period.
| 4Q’09 | 4Q’10 |
COGS
per Product
|
FY’09
|
FY’10
|
|||||||||||
| (2,109.9 | ) | (3,620.3 | ) |
Cost of Good
Sold (R$MM)
|
(5,470.7 | ) | (13,210.7 | ) | |||||||
| (715.9 | ) | (1,296.9 | ) |
CAA
|
(2,533.8 | ) | (4,068.0 | ) | |||||||
| (343.1 | ) | (687.1 | ) |
Sugar
|
(1,313.1 | ) | (2,116.2 | ) | |||||||
| (353.1 | ) | (567.0 | ) |
Ethanol
|
(1,088.9 | ) | (1,745.5 | ) | |||||||
| (19.7 | ) | (42.8 | ) |
Other
Products & Services - CA
|
(131.9 | ) | (206.4 | ) | |||||||
| (8.3 | ) | (24.6 | ) |
Rumo
|
(40.1 | ) | (115.5 | ) | |||||||
| (1,405.0 | ) | (2,381.8 | ) |
CCL
|
(2,916.1 | ) | (9,374.6 | ) | |||||||
| 19.3 | 83.0 |
Eliminations from
Consolidation
|
19.3 | 347.4 | |||||||||||
|
Average Unit
Cost (R$)
|
|||||||||||||||
| 482 | 593 |
Unit COGS of Sugar
(R$/ton)
|
430 | 512 | |||||||||||
| 808 | 1,011 |
Unit COGS of Ethanol (R$/thousand
liters)
|
728 | 813 | |||||||||||
| 1,681 | 1,757 |
CCL (R$/thousand
liters)
|
1,700 | 1,668 | |||||||||||
CAA
The cost of goods
sold and services rendered totaled R$4.1 billion, accompanying sugar and ethanol
sales growth and reflecting the merger of NovAmérica and the strong impact of
the upturn in the TSR price (due to higher sugar prices in Brazil and abroad)
and the reduction in TSR mainly due to adverse weather conditions throughout the
harvest.
The R$1.5 billion
increase results from the 19.1% upturn in average unit sugar costs and the 11.6%
rise in average unit ethanol costs, was chiefly due to:
|
|
Þ
|
The increase
in sugar sourcing (purchase of the raw material to be refined and product
for subsequent resale and distribution on the domestic market), a
|
18
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
traditional
NovAmerica practice, whose margins are lower and which had an impact of R$61
million;
|
|
Þ
|
The increase
of 25.5% in the average TSR price, as calculated by Consecana, from
R$0.2772/Kg of TSR to R$0.3492/Kg of TSR, which pushed up the cost of land
leased and sugarcane acquired from suppliers, adding approximately R$260
million;
|
|
|
Þ
|
The effect of
lower concentration in the TSR itself (cane sucrose content), from
139.0kg/ton of sugar cane to 129.8kg/ton, surpassed the gains in
efficiency in the process of mechanization of the harvest, leading to
additional costs of R$180 million;
|
|
|
Þ
|
Thanks to
excessive rainfall, there were less effective crushing days. Consequently,
3.3 million tonnes of cane which were expected to be processed were left
in the fields, generating an impact on the dilution of fixed agricultural
costs (planting, treatment and
leasing);
|
|
|
Þ
|
Despite the
harvesting difficulties, CLT costs (cutting, loading and transport) has
not increased benefited from the mechanical harvest which accounted for
64.5% of the total harvest, stood at R$6.25/tonne of cane, cheaper than
manual CLT costs.
|
Rumo
Rumo’s COGS totaled
R$115.5 million, including loading and transportation costs, the latter
consisting of costs from transshipment, road and rail freight and
storage.
The variable part
of the loading costs refer mostly to stevedore expenses, port tariffs and
electric power, while the fixed part refers to operational labor, equipment
rental, port leasing costs and maintenance.
CCL
CCL’s average COGS
recorded a decline of R$32/m3 in FY’10, or 2%, lower than FY’09, primarily due
to the reduction in Petrobrás’ Diesel price and lower lubricant costs due to the
appreciation of the Real against the dollar. The reduction of the average unit
cost quoted
19
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
above occurred
despite the upturn in the inter-harvest ethanol costs, which affected not only
hydrous costs but also those of gasoline C, due to the mandatory gasoline mix
with anhydrous ethanol. In addition, between February and April 2010, the ratio
was reduced from 25% to 20% turning even more expensive the cost of gasoline
C.
Gross
Profit
As a result, the
Company recorded a FY’10 gross profit of R$2.1 billion, an increase of 165.9%
compared to the previous year, with a gross margin equivalent to 13.9%. The
ethanol margin recovered throughout the harvest, reaching breakeven at the close
of the year. On the other hand, sugar recorded a positive margin of 37.4%,
partially benefiting from the increase in international prices and sugar’s
greater share of domestic sales. In addition, CCL’s gross unit margin moved up
by R$26/m3 to R$137/m3.
|
4Q'09
|
4Q'10
|
Gross
Margin per Product
|
FY'09
|
FY'10
|
|||||||||||
|
Unitary Gross
Margin
|
|||||||||||||||
| 224 | 456 |
Sugar (R$/ton)
|
161 | 305 | |||||||||||
| (36 | ) | 63 |
Ethanol (R$/thousand
liters)
|
58 | 1 | ||||||||||
| 120 | 153 |
CCL (R$/thousand
liters)
|
111 | 137 | |||||||||||
|
% Gross
Margin/Net Revenues
|
|||||||||||||||
| 31.7 | % | 43.5 | % |
Sugar
|
27.3 | % | 37.4 | % | |||||||
| -4.6 | % | 5.8 | % |
Ethanol
|
7.4 | % | 0.1 | % | |||||||
| 14.8 | % | 35.7 | % |
Rumo
|
25.6 | % | 27.0 | % | |||||||
| 6.7 | % | 8.0 | % |
CCL
|
6.1 | % | 7.6 | % | |||||||
Selling
Expenses
Selling expenses
increased by 100% compared to the previous year mainly due to the merger of CCL,
which contributed with R$400.1 million, and NovAmérica (R$91.4
million).
|
4Q'09
|
4Q'10
|
Selling
Expenses
|
FY'09
|
FY'10
|
|||||||||||
| (101.5 | ) | (225.3 | ) |
Selling
Expenses (R$MM)
|
(432.6 | ) | (864.6 | ) | |||||||
| (49.1 | ) | (120.6 | ) |
CAA
|
(317.8 | ) | (464.5 | ) | |||||||
| - | - |
Rumo
|
- | - | |||||||||||
| (52.4 | ) | (104.7 | ) |
CCL
|
(114.7 | ) | (400.1 | ) | |||||||
20
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
CAA
Excluding the
effects from the NovAmerica merger, CAA recorded selling expenses of R$373.1
million,17.4% higher than the previous year, chiefly due to the following
factors:
|
|
Þ
|
The higher
sugar exports caused an increase in freight and loading expenses of around
14.4%.
|
|
|
Þ
|
The increase
of 28% in the volume of ethanol exports, which pushed up selling expenses
by R$11.5 million.
|
|
|
Þ
|
Certain
initiatives throughout the year to improve the efficiency of make the
domestic sales management, including a reduction in retail commissions and
bonuses through the revision of sales contracts and agreements in the case
of sugar, and the elimination of less profitable
accounts.
|
Rumo
Given the nature of
its business, Rumo has no selling expenses.
CCL
CCL’s selling
expenses are mostly related to salaries and benefits, freight from product
deliveries, maintenance, repairs and environmental expenses and marketing. It is
worth noting that this fiscal year was characterized by investments in
marketing, maintenance and repairs, in order to improve the image of the service
stations, increase brand exposure and give more visibility
to ethanol.
General and Administrative
Expenses
G&A expenses
totaled R$497.2 million, representing 3.2% of FY’10 net revenue, a hefty 80.2%
up on the R$275.9 million recorded in FY’09, primarily due to the entry of
NovAmérica (R$23.7 million), 12 months of expenses from CCL (R$92.7 million) and
Teaçu consolidation by Rumo.
21
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
|
4Q'09
|
4Q'10
|
General
& Administrative Expenses
|
FY’09
|
FY’10
|
|||||||||||
| (78.2 | ) | (173.7 | ) |
G&A
Expenses (R$MM)
|
(275.9 | ) | (497.2 | ) | |||||||
| (62.0 | ) | (131.5 | ) |
CAA
|
(245.4 | ) | (386.3 | ) | |||||||
| 0.2 | (5.8 | ) |
Rumo
|
(5.7 | ) | (18.1 | ) | ||||||||
| (16.4 | ) | (36.5 | ) |
CCL
|
(24.8 | ) | (92.7 | ) | |||||||
CAA
G&A expenses
came to R$386.3 million, 57.4% higher than in FY’09, chiefly due to the entry of
NovAmérica. The integration of NovAmérica’s systems only took place in the
second half of 4Q’10, so its full effects will only be reflected as of 1Q’11.
Excluding this impact, G&A expenses increased by 47.8%, due to the following
factors:
|
|
Þ
|
Increase of
around R$42.0 million due to the provisioning of management and employee
bonus payments;
|
|
|
Þ
|
Upturn of
around R$20.0 million in expenses from consulting services, due to
projects such as the Shared Services Center (CAN), the implementation of
EVA and various other IT projects, a non-recurring
events;
|
|
|
Þ
|
Approximately
R$11.0 million from the pay rise following the collective bargaining
agreement and increase in other general expenses, such as travel expenses
driven by geographic dispersion from our current different offices
sites;
|
|
|
Þ
|
Fine of R$3.5
million levied by ANEEL due to breach of an electricity supply contract by
the Paraúna unit.
|
Rumo
Rumo’s G&A
expenses amounted to R$18.1 million, primarily related to the salaries and
benefits, security, insurance and consulting services.
CCL
CCL’s G&A
expenses totaled R$92.7 million, jeopardized by the following non-recurring
effects: (i) R$6.7 million from adjustments due to the transition to the CAN;
(ii) additional profit-sharing and bonus provisions of R$5.0 million; (iii)
additions to legal proceeding reserves totaling R$1.2 million.
22
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
EBITDA
As a result of all
the above, Cosan posted record EBITDA of R$1.7 billion in FY’10, 86.3% more than
its previous best of R$930million in FY’07. Of this total, CAA contributed R$1.4
billion, 106.5% up on the previous year, while CCL and Rumo contributed R$332.0
million and R$42.8 million, respectively. Even excluding the non-recurring
effects of REFIS (federal tax recovery program) and the sale of the aviation
fuel business, EBITDA maintained its historical level of R$1.4
billion.
|
4Q'09
|
4Q'10
|
EBITDA
|
FY’09
|
FY’10
|
|||||||||||
| 165.9 | 575.9 |
EBITDA
(R$MM)
|
718.0 | 1,733.1 | |||||||||||
| 7.1 | % | 13.1 | % |
Margin
|
11.5 | % | 11.3 | % | |||||||
| 121.9 | 477.7 |
●
CAA
|
628.7 | 1,358.3 | |||||||||||
| 14.1 | % | 25.3 | % |
Margin
|
19.8 | % | 25.2 | % | |||||||
| 5.8 | 13.5 |
●
Rumo
|
24.7 | 42.8 | |||||||||||
| 60.3 | % | 35.3 | % |
Margin
|
46.0 | % | 27.0 | % | |||||||
| 38.1 | 84.6 |
●
CCL
|
64.5 | 332.0 | |||||||||||
| 2.5 | % | 3.3 | % |
Margin
|
2.1 | % | 3.3 | % | |||||||
CAA
Depreciation and
amortization totaled R$584.7 million, 43.1% more than the R$408.6 million
reported in FY’09, due to heavy investments in order to increase production
efficiency through agricultural mechanization, co-generation and industrial
improvements, as well as investments in increasing crushing capacity of the new
plants (greenfield units). If this non-cash effect is excluded from operating
costs and expenses, CAA recorded EBITDA of R$1.4 billion, chiefly due to the
following:
|
|
Þ
|
Adherence to
the REFIS program, which generated a positive impact of R$270.3 million,
as explained in section F below;
|
|
|
Þ
|
Non-operating
revenue resulting from a capital gain of R$93.1 million due to the sale of
the aviation fuel business. In December 2008, Cosan S.A. acquired CCL
through its subsidiary Cosanpar Participações, which sold this division in
June 2009 for R$115.6 million. The difference between this amount and the
amount booked under property, plant and equipment related to the aviation
fuel business were
|
23
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
recorded in the
other operating income line, improving the EBITDA, as detailed in previous
Financial Letters.
|
|
Þ
|
Non-operating
expenses of R$29.9 million from the merger of Teaçu Armazéns Gerais
S.A.
|
Rumo
Rumo recorded
EBITDA of R$42.8 million in FY’10, showing an EBITDA margin of 27.0%. It is
worth noting that the company recorded R$9.4 million in other operating income
from dispatch/demurrage, take or pay and storage services, and a non-recurring
non-operating expense of R$5.4 million from accounting adjustments arising from
the merger of Teaçú. The depreciation and amortization for the period were
R$14.2 million.
CCL
Excluding the
non-cash impact of depreciation of R$37.5 million, CCL posted FY’10 EBITDA of
R$332.0 million, with a margin of R$59/m3, or 3.3% EBITDA margin versus 2.1% for
the previous year, due to the upturn in diesel, ethanol and gasoline sales
volume, wider gasoline, diesel and lubricant unit margins, and the capture of
logistics synergies from the merger with CAA.
Financial
Result
The FY’10 net
financial result was a positive R$420.4 million, versus a negative R$817.4
million in the previous year, chiefly fueled by the impact of the exchange
variation on dollar-denominated debt, which was positive by R$559.0 million in
FY’10 and negative by R$573.7 million in FY’09.
The exchange impact
was in turn mainly due to the 37% appreciation of the U.S. dollar against the
Real in FY’09 (R$1.6872/US$ x R$2.3152/US$) and the contrary effect in FY’10,
when the dollar fell by 23.1% against the Real (R$2.3152/US$ x R$1.7810/US$).
The foreign-currency debt has also been increasing in recent years, having
closed FY’08, FY’09 and FY’10 at R$1.6 billion, R$2.3 billion and R$3.6 billion,
respectively.
24
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
Interest on the
gross debt totaled R$414.3 million, versus R$244.5 million in FY’09, chiefly due
to the upturn from the merger of NovAmérica, which was consolidated as of June
2009, and the funding for the acquisition of CCL, which impacted only four
months in FY’09.
|
4Q'09
|
4Q'10
|
Financial
Expenses, Net (R$MM)
|
FY’09
|
FY’10
|
|||||||||||
| (68.3 | ) | (101.5 | ) |
Interest on Financial
Debt
|
(244.5 | ) | (414.3 | ) | |||||||
| 9.6 | 10.8 |
Financial Investments
Income
|
64.6 | 52.5 | |||||||||||
| (58.7 | ) | (90.7 | ) |
(=) Sub-total:
Interest on Net Financial Del
|
(179.9 | ) | (361.8 | ) | |||||||
| 4.7 | (27.9 | ) |
Other interest and monetary
variation
|
(90.8 | ) | (116.6 | ) | ||||||||
| 5.2 | (70.0 | ) |
Exchange Variation
|
(573.7 | ) | 559.0 | |||||||||
| (125.4 | ) | 168.8 |
Gains (losses) with
Derivatives
|
47.7 | 330.9 | ||||||||||
| (19.1 | ) | 6.0 |
Others
|
(20.7 | ) | 8.8 | |||||||||
| (193.4 | ) | (13.7 | ) |
(=) Net
Financial Expenses
|
(817.4 | ) | 420.4 | ||||||||
Sugar volume and
price positions with Trading companies and derivatives on March 31, 2009, as
well as foreign exchange hedge contracts to protect the Company’s future cash
flows are as follows:
|
Summary
of Hedge* as of March 31, 2010:
|
Fiscal
Year
|
|||||||
| 2010/11 | 2011/12 | |||||||
|
Sugar
|
||||||||
|
NY#11
|
||||||||
|
Volume (thd
tons)
|
1,659.4 | 512.7 | ||||||
|
Average Price
(¢US$/lb)
|
20.3 | 17.9 | ||||||
|
London #5
|
||||||||
|
Volume (thd
tons)
|
79.0 | - | ||||||
|
Average Price
(US$/ton)
|
622.1 | - | ||||||
|
FX
|
||||||||
|
US$
|
||||||||
|
Volume (US$
million)
|
472.3 | 170.0 | ||||||
|
Average Price
(R$/US$)
|
1.99 | 2.03 | ||||||
Note: For sugar we consider written
options once they are in the money as a hedge while for FX derivatives we
consider the Delta, regardless if in or out of the money
25
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
EBITDAH
EBITDAH totaled
R$2.1 billion, versus R$1.7 billion for EBITDA before hedge operations. As can
be seen in the graph below, the net hedge result was a positive R$330.9 million,
versus a positive R$47.7 million in FY’09. FX derivatives generated a gain of
R$517.2 million, helping to mitigate the negative impact of the dollar
devaluation on revenue from dollar-denominated sales. Commodities derivatives
recorded a loss of R$186.2 million, versus a gain of R$64.0 million in FY’09,
reflecting the recovery of international sugar prices throughout most of
2010.
The table below
gives a breakdown of EBITDAH per business segment:
|
4Q'09
|
4Q'10
|
EBITDAH
|
FY’09
|
FY’10
|
|||||||||||
| 40.4 | 744.7 |
EBITDAH
(R$MM)
|
765.7 | 2,064.0 | |||||||||||
| 1.8 | % | 16.3 | % |
Margin
|
12.1 | % | 13.2 | % | |||||||
| (3.5 | ) | 646.6 |
●
CAA
|
676.4 | 1,689.2 | ||||||||||
| -0.5 | % | 32.0 | % |
Margin
|
21.3 | % | 29.6 | % | |||||||
| 24.7 | 13.5 |
●
Rumo
|
24.7 | 41.8 | |||||||||||
| - | 35.3 | % |
Margin
|
- | 26.6 | % | |||||||||
| 38.1 | 84.6 |
●
CCL
|
64.5 | 332.0 | |||||||||||
| 2.5 | % | 3.3 | % |
Margin
|
2.1 | % | 3.3 | % | |||||||
26
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
Income
Tax
In this fiscal
year, Cosan S.A. income tax expenses amounted R$433 million out of which R$355
million were deferred. This result represented an effective tax rate of 30.7% on
earnings before taxes (compared to 34% of nominal rate), which reflects both
common permanent additions and exclusions and positive impact from specific
exclusions from the Tax Recovery Program, described below. In the previous year,
we had a positive impact of income tax (R$235 million) as result of losses
before taxes on that period and the resulting in deferred tax
credits.
Net
Income
Cosan posted FY’10
net income of R$986.5 million, versus a net loss of R$473.8 million the year
before, fueled by the positive impact of higher sales volume and prices on all
segments of the business, which pushed up the gross margin by R$1.3 billion, the
effect of the exchange variation on dollar-denominated debt and the benefits
from the Refis program.
Net
Income (R$ million)
27
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
FINANCIAL
SITUATION
Cosan closed FY’09
with gross financial debt of R$5.3 billion (excluding Resolution 24711),
42% up on the R$3.7 billion recorded at the end of FY’09 and just 3.3% up on the
R$5.2 billion posted at the close of 3Q’10.
In November 2009,
the Company implemented several measures to improve its debt profile, including
full settlement of the promissory notes, the 209 senior notes, bank credit
certificates and debentures, the last two resulting from the acquisition of
NovAmérica and the contracting of: (i) US$ 430 million in export repayments,
maturing in 5 years; (ii) US$ 100 million in export credit notes (NCEs),
maturing in 3 years; (iii) R$ 300 million in export credit certificates (CCE),
maturing in 2 years; and (iv) the disbursement by the BNDES (Brazilian
Development Bank) of part of the funding for Jataí and Gasa.
In 4Q’10, the
Company opted to prepay financing of R$90 million with the IFC due to its high
cost, given that a portion is linked to the Group’s operating cash flow. In
addition, the BNDES disbursed R$123.4 million in new contracted loans and the
Company contracted additional FINAME funding of around R$100.0 million, for
machinery and equipment purchases. In the 4Q’10, a loan named “Proinfa” has been
reclassified to the BNDES line as well as for part of the FINAME loan amounting
to approximately R$40.0 million.
28
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
|
Debt
per Type (R$MM)
|
FY’09
|
3T'10
|
4Q'10
|
%
ST
|
Var.
|
|||||||||||||||
|
Foreign
Currency
|
2,334.9 | 3,415.8 | 3,622.5 | 206.6 | ||||||||||||||||
|
Perpetual Notes
|
1,054.1 | 792.8 | 810.9 | 1.2 | % | 18.12 | ||||||||||||||
|
Senior Notes 2017
|
936.7 | 716.7 | 720.6 | 1.1 | % | 3.91 | ||||||||||||||
|
Senior Notes 2009
|
86.5 | - | - | 0.0 | % | - | ||||||||||||||
|
Senior Notes 2014
|
- | 632.3 | 631.2 | 1.2 | % | (1.01 | ) | |||||||||||||
|
IFC
|
114.3 | 90.9 | - | 0.0 | % | (90.94 | ) | |||||||||||||
|
FX Advances
|
143.3 | 223.2 | 296.4 | 100.0 | % | 73.19 | ||||||||||||||
|
Pre-Export Contracts
|
- | 960.0 | 980.5 | 20.5 | % | 20.51 | ||||||||||||||
|
Export Credit Notes
|
- | - | 182.8 | 2.6 | % | 182.83 | ||||||||||||||
|
Local
Currency
|
1,420.1 | 1,749.0 | 1,711.4 | (37.69 | ) | |||||||||||||||
|
Promissory Notes
|
1,162.0 | - | - | 0.0 | % | - | ||||||||||||||
|
BNDES
|
230.5 | 844.8 | 1,057.8 | 8.2 | % | 213.00 | ||||||||||||||
|
Finame (BNDES)
|
44.7 | 156.1 | 201.1 | 16.0 | % | 45.02 | ||||||||||||||
|
Working Capital
|
25.2 | 20.0 | 19.5 | 23.1 | % | (0.54 | ) | |||||||||||||
|
Overdraft
|
0.1 | 42.0 | 36.8 | 100.0 | % | (5.19 | ) | |||||||||||||
|
Credit Banking Notes
|
- | 121.1 | - | 0.0 | % | (121.06 | ) | |||||||||||||
|
Credit Notes
|
- | 510.5 | 378.7 | 20.8 | % | (131.75 | ) | |||||||||||||
|
CDCA
|
- | 60.2 | 61.4 | 51.2 | % | 1.26 | ||||||||||||||
|
PROINFA
|
- | 42.2 | - | 0.0 | % | (42.16 | ) | |||||||||||||
|
Expenses with Placement of
Debt
|
(42.4 | ) | (47.7 | ) | (44.0 | ) | 35.6 | % | 3.73 | |||||||||||
|
Gross
Debt
|
3,755.0 | 5,164.9 | 5,333.8 | 14.9 | % | 168.92 | ||||||||||||||
|
Cash and Marketable
Securities
|
719.4 | 864.1 | 1,078.4 | 214.29 | ||||||||||||||||
|
Net
Debt
|
3,035.6 | 4,300.8 | 4,255.4 | (45.37 | ) | |||||||||||||||
Cosan ended the
year with a cash position of R$1.1 billion, reducing net debt to R$4.3 billion,
or 2.4 times EBITDA in the last 12 months. This EBITDA is calculated using CAA
and CCL’s last 12 month EBITDA and NovAmérica’s annualized last 10 month
EBITDA.
INVESTMENTS
Cosan’s investment
flows totaled R$1.8 billion in FY’10, totaling capex of R$1.9 billion, chiefly
in greenfield projects, co-generation projects, planting and inter-harvest
maintenance, less R$115.5 million from the sale of the aviation fuel
business.
Consolidated capex
was 43.1% higher than in the previous year, mainly due to the inclusion of
NovAmérica’s assets, investments of R$143.8 million by Rumo, the return of
29
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
planting costs to
historical levels and the inclusion of CCL for the entire year, versus only four
months in FY’09.
|
4Q'09
|
4Q'10
|
Capex
(R$MM)
|
FY’09
|
FY’10
|
|||||||||||
| 167.2 | 307.8 |
CAA - Capex
Operacional
|
553.7 | 722.5 | |||||||||||
| 22.0 | 47.3 |
● Sugar Cane
Planting Costs
|
118.9 | 211.9 | |||||||||||
| 84.3 | 197.7 |
● Inter-harvest Maintenance
Costs
|
144.4 | 260.9 | |||||||||||
| * | 22.3 |
● SSHE &
Sustaining
|
* | 45.0 | |||||||||||
| * | 30.5 |
● Mechanization
|
* | 30.5 | |||||||||||
| 61.0 | 10.1 |
● Projects CAA
|
290.4 | 174.2 | |||||||||||
| 160.9 | 245.7 |
Operating
Capex - CAA
|
781.2 | 972.0 | |||||||||||
| 53.4 | 112.0 |
● Co-generation
Projects
|
325.8 | 376.4 | |||||||||||
| 107.5 | 46.1 |
● Greenfield
|
455.4 | 462.2 | |||||||||||
| * | 87.5 |
● Expansion
|
* | 133.4 | |||||||||||
| 328.1 | 553.5 |
Capex -
CAA
|
1,334.8 | 1,694.5 | |||||||||||
| 6.4 | 48.1 |
CCL
|
11.3 | 87.8 | |||||||||||
| - | 143.8 |
Rumo
|
- | 143.8 | |||||||||||
| 334.6 | 745.4 |
(=) Capex -
Consolidated Cosan
|
1,346.1 | 1,926.1 | |||||||||||
| 227.7 | 30.7 |
● Investments
|
1,823.6 | 16.0 | |||||||||||
| (372.1 | ) | (5.3 | ) |
● Cash received on Sale of Fixed
Assets
|
(372.1 | ) | (126.2 | ) | |||||||
| 190.3 | 770.8 |
(=) Investment
Cash Flow
|
2,797.6 | 1,815.9 | |||||||||||
* FY’09 figures
unavailable, investments previously included in the Projects CAA
line
CAA
In FY’10, the
Company’s planting investments totaled R$211.9 million, representing a return to
historical levels. Planted area came to 53,600 hectares, versus 28,100 hectares
in FY’09. Land preparation in as yet unplanted areas is also included in this
line.
Inter-harvest
maintenance investments totaled R$260.9 million, chiefly due to the addition of
the NovAmérica units and the impact of the shorter inter-harvest period, which
increased the need for third-party services.
As of this quarter,
investments in “Health, safety and the environment & prevention”, which came
to R$45.0 million in FY’10, will be recognized separately in order to highlight
those investments in our units designed to generate gains in
efficiency.
The company
invested R$30.5 million in mechanization, giving a mechanization ratio of
64.5%.
30
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
Electricity
co-generation investments amounted to R$376.4 million, 15% up on the year
before, reflecting the conclusion of certain projects (Copi, Gasa and Rafard),
the operational start-up of two major projects (Barra and Bonfim) and the
beginning of works in other plants.
Greenfield capex
totaled R$462.2 million, associated with the concluding phase of the Jataí (GO)
and Caarapó (MS) projects.
Expansion projects
absorbed R$133.4 million, related to the expansion of the Costa Pinto, Gasa,
Bonfim, Barra, Tamoio, Ipaussu and Junqueira sugar plants, increasing the
company’s production capacity by approximately 400,000 tones per
year.
In June 2009, the
Company concluded the acquisition of NovAmérica (for more details, see section G
– Material Facts).
Rumo
Rumo began
investing in locomotives and rolling stock in 4Q’10, totaling R$143.8 million in
FY’10. The company received a BNDES financing line to acquire these
assets.
CCL
CCL invested R$87.8
million in improvements to service stations, terminal expansions and
renovations. The R$76 million increase over FY’09 was mainly due to the
inclusion of a full year of the company’s investments for the first time in
FY’10.
EFFECTS
OF THE TAX RECOVERY PROGRAM (“REFIS”)
The Company entered
in the Tax Recovery Program set by the Brazilian Government in accordance with
law No. 11.941/09 and Provisional Measure MP 470/09. In the scope of these
programs, Cosan had deductions in tax liabilities contingent, mainly related to
recovery of taxes and federal contributions with premium IPI credit and IPI
credit on purchases of raw material and inputs with zero tax rate, exempt and
not exempt, which generated a benefit in the FY’10, recognized under Other
Operating Revenues, in the
31
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
amount of R$ 270.3
million. Additionally, this program also enabled the company to use income tax
losses credits in the amount of approximately R$ 204 million, to reduce tax
obligations that were previously being the subject contest of dispute by the
Company. This last benefit, in spite of not impacting the result under the
accounting point of view, benefited the Company in the sense that the mentioned
tax credits are used only as the Company presents profit according to tax
criteria, and is limited to 30% compensation in each annual period.
RETAINED
EARNINGS PROPOSAL
It will be
proposed, at Cosan S.A. General Shareholders’ Meeting that will take place on
July 30th,
2010, that Retained Earnings amount R$266.3 million, being partially designated
for the Company’s annual investment program, established on the FY’11 Budget
that will also be analyzed and approved at above mentioned General Shareholders
Meeting.
RESEARCH
AND DEVELOPMENT
In 2002 we
established a partnership with the University of Campinas – UNICAMP to develop a
system of geographical information, aiming at improvement of the monitoring of
our crops. Through this partnership we have developed a tool that monitors the
sugar cane crops using satellite images. The system provides subsidy for
conduction of more precise production estimates, in addition to generating
extremely detailed information concerning the general conditions of our cane
fields, which gives us the opportunity of enhancing the procedures for
management of agricultural cultures. Presently we monitor all of the land areas
where we produce sugarcane, whether on our own land or on leased areas or
suppliers’ areas.
We have established
service agreements with the following technological institutes for development
of new varieties of sugarcane: Centro de Tecnologia
Canavieira (Sugarcane Technology Center), or CTC, of which we are the
majority shareholder; Federal University of São Carlos – UFSCAR and Instituto Agronômico de
Pesquisa (Agronomics Research Institute), or IAC. The CTC is a private
institution intended for research and development of new technologies for
agricultural, logistics and industrial activities, as well as for creation of
new varieties of sugarcane. The CTC developed the biodegradable plastic (PHB)
and biological alternatives for control of plagues. Furthermore, it created the
VVHP sugar (with
32
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
extremely high
polarization), which requires less energy to be processed, and also developed
the co-generation technology. We analyze the best forms for possible use of our
varieties of sugarcane in view of the different soil and climatic conditions of
the five main regions of the State of São Paulo.
We have maintained
an agreement with CanaVialis S.A. (“CanaVialis”) since June 2006, to provide to
Cosan a program of genetic enhancement of sugarcane specifically developed for
our mills. The Company has been obtaining benefits from its support service and
from the use of its bio-plant, which allows us to reduce the time that is
necessary for production of seedlings and provides for us access to new and
improved varieties of sugarcane by means of its genetic enhancement program. In
2006 CanaVialis implemented an experimental station at our Destivale unit, which
conducts tests of new species of sugarcane specially selected for Cosan’s
production structure.
We analyze and
develop, together with our suppliers and partners, different types of input,
machinery and agricultural implements used to facilitate and improve the
cultivation of sugarcane, considering also the different conditions of our soil.
We share this technology with sugarcane suppliers so that they can obtain better
sugarcane yields and quality.
In December 2009
the partnership between Cosan and Amyris was announced, which aims at
implementation of Amyris technology in one of the mills of the group for
production of biofuels with high added value. With an investment of up to R$50
million, in addition to producing sugar and ethanol the unit will be also able
to produce farnasene, a chemical component that results from fermentation of
sugarcane syrup with yeasts. The partnership is still in a phase of study of the
implementation and obtainment of capital for investment. For Cosan, the
development of new sources of renewable energy, such as the biofuels, is
strategic, and this work with Amyris is part of this context.
PROTECTION
OF THE ENVIRONMENT
Oriented by
principles of eco-efficiency, the operations of the Cosan Group are regulated by
environmental licenses issued by the various pertinent authorities of the States
in which we are present. Our units seek to develop and implement management
systems that are recognized worldwide.
33
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
Following its
policy, jointly with another three partners Cosan announced the conduction in
June/08 of the first international shipment of ethanol with a
socio-environmental seal and with verification of important sustainability
criteria. The transaction, shipment of which had Sweden as its destination, is
the result of a pioneering agreement executed between Cosan and other ethanol
producers with Swedish corporation Sekab, the most important buyer of Brazilian
ethanol in Europe. The agreement is an initiative of the companies involved in
the transaction, aimed at taking the first step in a process of continual
improvement, with the purpose of serving one of the most demanding consumers in
the world. It is important to stress that the mills were able to meet the
requirements of the European consumer without altering their current operating
practices.
The major
innovation of this agreement is the formal establishment of a process of
certification by means of an international and independent company, which will
conduct auditing at all of the production units twice-a-year, in order to verify
compliance with the following established criteria: (i) reduction of emission of
carbon dioxide; (ii) minimum levels of harvest mechanization; (iii) commitment
to preservation of the areas of native forest; (iv) zero tolerance for child and
non-regulated labor; (v) observance of the minimum wages of the sector; and (vi)
adhesion to and compliance with the targets established by the
Agro-Environmental Protocol.
In this way, the
companies show evidence of compliance with labor laws, respect for environmental
norms and also strengthen their commitment to adjustment to the rules of
34
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
the
Agro-Environmental Protocol, executed with the State of São Paulo and
stipulating the end of the practice of burning the crops until
2014.
As regards Cosan
CL, we will be proceeding with all of the projects related to the environment,
among which, are highlighted (i) the Esso-Mamirauá Program for Environmental
Education in the Central Amazon Region; (ii) the OndAzul Foundation, which is
dedicated to preservation of aquatic ecosystems, and (iii) the PiraCena Project,
which aims at study and recovery of the Piracicaba River Basin, in São Paulo.
Cosan CL, which has always been committed to maintaining high standards of
safety, healthy and care with the environment, maintaining awareness of the
importance of managing the businesses with the purpose of preventing incidents
and controlling spillage and loss of fuels, as well as of rapid and efficient
response to incidents resulting from operations, cooperating with the industrial
organizations and with the authorized government agencies.
HUMAN
RESOURCES
On March 31, 2010,
with inclusion of the employees of our controlled subsidiaries (except for CCL),
we had 38,573 employees and 34 interns. All of our employees, including migrant
and temporary rural workers are hired directly by the Company under the CLT
(Brazilian Consolidated Labor Laws) system.
Controlled
subsidiary Cosan CL has on its workforce approximately 826 employees and 88
interns, who are assigned principally in the cities of Rio de Janeiro and
Curitiba, likewise hired under the CLT system.
The Company
maintains harmonious relationships with the Workers’ Unions that represent its
employees, of which approximately 30% of the employees are members. The
collective bargaining agreements to which we are parties or that we negotiate
directly normally have duration of 12 months. The Company ensures compliance
with applicable labor legislation, in addition to strict observance of the
conditions covenanted in the collective bargaining
35
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
instruments
executed with the unions, applying them equally to unionized and non-unionized
employees.
Furthermore, as
mentioned in the previous topic, the Company has reiterated its commitment
established with a Swedish company, in which it committed to maintaining full
observance of labor laws, particularly zero tolerance for child labor and for
degrading working conditions. This commitment has always permeated Cosan’s
conduct and has been fully observed the Company.
We offer for our
employees, including our executives, benefit packages that include balanced
meals, medical, hospital and dental plan, subsidy for acquisition of
medications, food basket or meal vouchers, group life insurance, scholarships,
among others, which are applicable to its different internal publics. All of our
employees are eligible for the profit sharing programs, which are customized by
area of activity and developed in accordance with applicable legislation, with
the participation of workers’ committees and representatives of the professional
unions, the remuneration for which is based on accomplishment of operating
targets and performance. The members of our Board of Directors are not entitled
to such benefits.
In the last fiscal
year we had results that were relevantly positive in matters concerning
Occupational Safety and Health. The corporate team was restructured and began to
rely on specialists in the areas of Management, Hygiene, Ergonomics and
Emergency Control Systems. This year projects were developed that contributed to
a reduction of more than 20% of the TF – Frequency Rate for lost-time accidents,
when compared with the previous fiscal year. Among the projects implemented we
highlight: (i) the PROEX – Programs for Behavioral Excellence, (ii) the Skills
Development for Investigation and Analysis of Accidents and of Occupational
Hygiene, and (iii) the Safety Audit in the Agricultural and Industrial areas and
the 5 Ss Program.
The company
consolidated its professional skills development programs, with strong activity
and investments in structured programs for development of managers, leaders and
engineers, through an internal MBA and skills development training for
professionals of the technical and production areas. In the last year the bases
were structured for a solid career and succession plans in the Company, in
addition to continuity of the performance and competencies appraisal programs,
based on the meritocracy method.
36
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
CORPORATE
RESTRUCTURING AND NEW BUSINESS
During the fiscal
year ended on March 31, 2010, the principal corporate transactions carried out
by the Company were:
|
|
a.
|
Novo Rumo Logística
S.A.
|
According to the
shareholders agreement executed on April 9, 2008, harbor concessions and assets
for export of sugar of the Company and of Rezende Barbosa S.A. Administração e
Participações (“Rezende Barbosa”) were concentrated in Novo Rumo Logística S.A.
(“Novo Rumo”), which is indirectly controlled by the Company.
On
April 10, 2009 the Company and Rezende Barbosa, which is controller of Nova
América, provided for integration of the Cosan and Teaçu Armazéns Gerais S.A.
(“Teaçu”) port terminals, which until then had been controlled by Rezende
Barbosa. As a result of its transaction, which involved payment of R$121,331
million and issuance of shares of Novo Rumo, the Company acquired 100% of Teaçu,
thereby indirectly holding 64.06% of Novo Rumo, with 28.82% remaining in
possession of Rezende Barbosa.
|
|
b.
|
Curupay Participações
S.A.
|
On
June 18, 2009 the shareholders of the Company approved in an Annual
Shareholders’ Meeting the acquisition of Curupay S.A. Participações (“Curupay”),
formerly controlled by Rezende Barbosa, through e issuance of 44,300,389 common
shares, with equity value of R$334,172 million, the market value of which on
that date was R$624,192 million.
As
from such date, the Company absorbed in its net equity the investment of
Curupay, represented (i) 28.82% of participation in Novo Rumo, (ii) 100% of
direct participation in Nova América S.A. Trading, and (iii) 100% of direct and
indirect participation in Cosan Alimentos S.A. (“Cosan Alimentos”, formerly
named Nova América S.A. - Agroenergia) and relevant subsidiaries. As a result of
this transaction, the Company raised its direct and indirect participation in
Novo Rumo to 92.9%.
On
November 18, 2009 Cosan Alimentos absorbed Nova América S.A.
Trading.
37
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
|
|
c.
|
Sale of the aviation
fuels business to Shell do Brasil
Ltda.
|
On
June 17, 2009 subsidiary Cosanpar sold to Shell the assets of the aviation fuel
business, for the amount of R$115,601 million.
|
|
d.
|
TEAS Terminal
Exportador de Álcool de Santos (Santos Ethanol
Exporting Terminal) (“TEAS”)
|
On
November 24, 2009 the Company acquired 10,527,295 common shares issued by TEAS,
for the total amount of R$20,002 million, increasing its equity participation by
more than 26.67%, thereby detaining 66.67% of the total and voting capital stock
of the mentioned company.
|
|
e.
|
Logispot Armazéns
Gerais S.A. (“Logispot”)
|
On
November 12, 2009, through its subsidiary Rumo Logística S.A. (“Rumo”), Cosan
acquired 166,590 common shares issued by Logispot, equivalent to 14.28% of the
capital stock of that company.
|
|
f.
|
Joint Venture with
Shell
|
In February 2010
the Company executed a non-binding memorandum of understanding, valid for 180
days, with Shell International Petroleum Company Ltd. ("Shell"), by which they
plan to create a joint venture involving the sugar, ethanol and fuel
distribution assets of the Company and the fuel distribution assets of Shell in
Brazil. Formalization of this agreement is subject to fulfillment of certain
conditions and conclusion of the negotiations.
PERSPECTIVES
The new fiscal year
promises to be one of major challenges for all of the Cosan business units. The
joint venture with Shell must have its negotiations completed and its terms
approved by the regulating agencies. Rumo Logística has an ambitious plan of
conduction
38
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
of investments,
while the co-generation of energy is expected to have 10 units producing and
delivering energy.
During this year
the fuels distribution sector will have a major opportunity for growth and for
obtainment of important synergies through the joint venture with Shell. Once the
joint venture is approved, a number of measures related to integration of the
assets and consequent corporate restructuring will be necessary. The joint
venture will permit obtaining volume gains that, together with the logistics and
administrative operating synergies, will create all of the opportunities for the
new company to become the most efficient in the sector.
Rumo Logística has
declared that as from January 2010 the agreements with ALL became valid and
enforceable in all of their covenanted terms and conditions. Thus, the
investments plan of approximately R$1,2 billion will continued to be implemented
so as to increase the capacity of rail transport of bulk sugar and its
sub-products, from the present 2 million tons to approximately 11 million by
2013, securing new customers, motivating them to migrate from highway
transportation to the railway modal, which is more efficient, economical and
integrated with the port services.
In the area of
trading energy from sugarcane bagasse (co-generation) we will have major
advancements with the start-up of new production units (Barra, Bonfim, Jataí and
Caarapó), which during this harvest will start trading surplus energy, so as to
perform their contractual obligations established by means of prices negotiated
in the energy auctions that have been held.
The sugar and
ethanol segment will continue to offer major opportunities for growth and
consolidation, mainly from the prices cycle of the sugar commodity, which is
entering a worldwide surplus phase, after 2 consecutive years of deficit.
Furthermore, this year, after execution of the joint venture with Shell, we will
be well capitalized and with low leverage in order to select the best deals in
the M&A market, contributing to increased consolidation of the sector. In
addition, the processes of continual enhancement and the quest for efficiencies
in our production costs, in the existing and acquired units, will continue to
guide us.
39
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
INVESTORS
RELATIONS
Cosan is a
publicly-held joint stock company. On March 31, 2010 capital stock was
represented by 406,560,317 common registered book-entry shares (328,284,884 on
March 31, 2009), with no par value.
The Company
conducted its initial shares offering in the São Paulo Stock Exchange (BOVESPA)
in November 2005, listed under the principal level of corporate governance of
the BOVESPA, the Novo
Mercado (New Market). The Company’s controller, Cosan Limited, conducted
its initial shares offering in the New York Stock Exchange (NYSE) in August
2007. The Cosan Group is a pioneer in the sugar and ethanol sector, having
become the first Brazilian group to go public in Brazil and in the United States
of America.
The Company’s
relationship with the financial community and with the investors stands out for
its disclosure of information with transparency and characterized by its respect
for legal and ethical principles. The Investors Relations area maintains
contacts with investors and market analysts, sponsoring events for disclosure of
information concerning the Company’s performance. Cosan also maintains a site
for relationship with investors that contains information that is always
updated, specific, segmented and aimed at distinct publics: analysts,
institutional investors and individual investors.
CORPORATE
GOVERNANCE
Cosan conducts its
operations following best corporate governance practices. The Company is listed
in the principal level of Corporate Governance of the Bovespa, known as the Novo
Mercado, since it launched its shares in the Brazilian stock market in 2005, and
is bound by the arbitration rules of the Câmara de Arbitragem do
Mercado (Chamber of Arbitration of the Market), in accordance with the
Commitment Clause of its By-Laws.
40
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
The Company’s
equity controller was the first Foreign Private Investor (FPI) in the sector
that it operates to be listed on the New York Stock Exchange. In this way, the
Company implemented the internal controls procedures with the aim of adapting to
the requirements of Section 404 of the Sarbanes-Oxley Law (SOX), based on the
methodology established by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) for internal controls. The Company adjusted to
Section 302 of the same Law, which determines that executive officers must
represent that they are responsible for the controls and procedures for
disclosure of information. The Company has been continually enhancing its
internal processes and ratifying its commitment to better Corporate Governance
practices.
Board of Directors – Our board
of directors is the body that takes the decisions and is responsible for, among
other incumbencies, establishing the general guidelines and policies of our
business. Our board of directors is also responsible for supervision of our
executive board and for monitoring implementation by the executive officers of
the policies and guidelines that are established from time to time by the board
of directors. The Cosan Board of Directors consists of nine members, of whom
three are independent. On August 29, 2008 the members of the Board of Directors
of the Company were reelected in an Annual Shareholders’ Meeting for a new term
of office.
Fiscal Council – Instituted
and elected on August 30, 2007, it consists of three regular members, all of
whom have an annual term of office. Integrated with the transparency and
corporate governance policy, the Fiscal Council meets every quarter to monitor
the administrative acts and to analyze the Company’s financial
statements.
Executive Board – Acts as an
executive body. The Executive Officers are responsible for internal
organization, daily transactions and implementation of the general policies and
41
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
guidelines
established from time to time by our board of directors. Responsible for direct
management of the businesses, it consists of a president and chief executive
officer, three executive vice-presidents and three executive officers, who are
elected by the Board of Directors for a term of office of two years, which can
be extended until investiture of the members to be elected
subsequently.
Risk Management Committee -
Our risk management committee comprises three members of the Board, one of them
independent, which meets at least annually to discuss and determine the
Company's hedge policy. Members of our risk management committee are Mr. José
Alexandre Scheinkman (Chairman), Marcelo Eduardo Martins and Marcos Marinho
Lutz. Additionally, we have also established an Executive Committee of Risks,
formed by a member of the Board and several executives of the Company. The
Executive Committee meets weekly to analyze the behavior of the exchange and
commodity markets, to discuss the positions of hedging and pricing strategy for
the sugar’s export, to reduce the adverse effects of changes in sugar prices and
the exchange rate as well as monitoring the liquidity and counterparty (credit)
risks. Our policy is to hedge the cash flow’s exposure to the risks described
above mainly by means of natural hedge. For exposures that can not be considered
as natural hedge, we use derivative financial instruments, including futures
contracts, swaps and options in OTC markets, stock exchanges or financial
institutions with high ratings.
Audit Committee – Cosan
Limited Board of Directors decided that Marcus Vinicius Pratini de Moraes
(Chairman of the Board) and Mailson Ferreira da Nóbrega are the “financial
specialists of the audit committee”, as defined in the current rules of the SEC,
fulfilling the requirements of independence of the SEC and the listing standards
of the NYSE. To obtain more information about our audit committee, see “Item 6C.
Board Practices - Audit Committee”. The members of our audit committee are
Messrs. Marcus Vicinius Pratini de Moraes (Chairman), Mailson Ferreira da
Nóbrega and Hélio França.
Compensation Committee – We have
a compensation committee that is responsible for reviewing and approving the
remuneration and benefits granted to our executive officers and to the key
members of our management, making recommendations to the Board in relation to
matters relative to compensation and to granting to our executive officers and
other employees remuneration based on shares, according to our stock incentives
plan. The committee is also responsible for analyzing the terms of the plan, for
altering it and for
42
COSAN
S.A. INDUSTRIA E COMERCIO
Management
Report
March 31st,
2010
taking any other
measures that may be necessary to manage it in our best interest. The members of
our compensation committee are Messrs. Pedro Isamu Mizutani (Chairman), Marcus
Vinicius Pratini de Moraes and Marcelo de Souza Scarcela Portela.
RELATIONSHIP
WITH OUTSIDE AUDITORS
The Company’s
policy for contracting with the independent auditors services that are not
related to outside auditing is based on the principles that preserve their
independence. According to internationally accepted standards, these principles
are that: (a) the auditor must not audit his/her own work; (b) the auditor must
not perform in a position of management with his/her client, and (c) the auditor
must not legally represent the interests of his/her clients.
In compliance with
CVM Instruction No. 381/03, we inform that the other services contracted with
our independent auditors – Ernst & Young Auditores Independentes S.S. and
their related parties, during the current fiscal year, were related to review of
the internal controls, review of the sustainability report and other services
related to auditing work and that had no implication for the principle of
independence described in the above paragraph.
APPRECIATION
The Management of
Cosan S.A. Indústria e Comércio is thankful to its shareholders, customers,
suppliers and financial institutions for their collaboration and trust, and most
specially to its employees for their dedication and applied
efforts.
Management.
* * * *
*
43
STATEMENT FROM
OFFICERS
Under the terms of
article 25, 1st
paragraph, 5th and
6th
items of Instruction CVM nr 480/09, the Executive Body declares that reviewed,
discussed and agreed with the Financial Statements from the fiscal year 2010,
ended on March 31st,
2010. The Body also reviewed, discussed and agreed with the Report of
Independent Auditors issued on June 10th,
2010, by Ernst & Young Auditores Independentes S.S., CRC
2SP015199/O-6.
* * * *
*
44
Consolidated
Financial Statements
Cosan Limited
as of March 31,
2010 and 2009 and April 30, 2008
COSAN
LIMITED
CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2010 and
2009 and April 30, 2008
TABLE
OF CONTENTS
|
Report of
Independent Registered Public Accounting Firm
|
1
|
|
Consolidated
balance sheets March 31, 2010 and 2009
|
2
|
|
Consolidated
statements of operations for the year ended March 31, 2010, for
the
|
|
|
eleven-month
period ended March 31, 2009 and for the year ended April 30,
2008
|
4
|
|
Consolidated
statements of shareholders’ equity and comprehensive income (loss)
for
|
|
|
the year
ended March 31, 2010, for the eleven-month period ended March 31,
2009
|
|
|
and for the
year ended April 30, 2008
|
5
|
|
Consolidated
statements of cash flows for the year ended March 31, 2010, for
the
|
|
|
eleven-month
period ended March 31, 2009 and for the year ended April 30,
2008
|
6
|
|
Notes to the
Consolidated Financial Statements
|
7
|
 |
Condomínio São Luiz
Av. Pres. Juscelino Kubitschek, 1830
Torre I - 8º Andar - Itaim Bibi
04543-900 - São Paulo, SP, Brasil
Tel: (5511) 2573-3000
Fax: (5511) 2573-5780
www.ey.com.br
|
Report
of Independent Registered Public Accounting Firm
The Board of
Directors and Shareholders of
Cosan
Limited
We have audited the
accompanying consolidated balance sheets of Cosan Limited and subsidiaries as of
March 31, 2010 and 2009, and the related consolidated statements of operations,
shareholders' equity, comprehensive income (loss), and cash flows for the year
ended March 31, 2010, the eleven-month period ended March 31, 2009 and the year
ended April 30, 2008. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our
audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States of America). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Cosan Limited and
subsidiaries as of March 31, 2010 and 2009, and the consolidated results of
their operations and their cash flows for the year ended March 31, 2010, the
eleven-month period ended March 31, 2009 and the year ended April 30, 2008, in
conformity with U.S. generally accepted accounting principles.
We also have
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States of America), Cosan Limited's internal control
over financial reporting as of March 31, 2010, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated June 10, 2010
expressed an unqualified opinion thereon.
São Paulo, June 10,
2010
ERNST &
YOUNG
Auditores
Independentes S.S.
CRC
2SP015199/O-8
Luiz Carlos
Nannini
Accountant CRC
1SP171638/O-7
Uma
empresa-membro da Ernst & Young Global Limited
1
COSAN
LIMITED
Consolidated
balance sheets
March 31, 2010 and
2009
(In thousands of
U.S. dollars, except share data)
|
March
31,
|
March
31,
|
|||||||||
|
2010
|
2009
|
|||||||||
|
Assets
|
||||||||||
|
Current
assets:
|
||||||||||
|
Cash and cash
equivalents
|
623,675 | 508,784 | ||||||||
|
Restricted
cash
|
25,251 | 5,078 | ||||||||
|
Derivative
financial instruments
|
129,456 | 7,352 | ||||||||
|
Trade
accounts receivable, less allowances: 2010 – $32,144;
|
||||||||||
|
2009 –
$21,241
|
430,328 | 258,863 | ||||||||
|
Inventories
|
587,720 | 477,792 | ||||||||
|
Advances to
suppliers
|
132,258 | 88,991 | ||||||||
|
Recoverable
taxes
|
184,090 | 114,641 | ||||||||
|
Other current
assets
|
49,155 | 65,956 | ||||||||
| 2,161,933 | 1,527,457 | |||||||||
|
Property,
plant, and equipment, net
|
4,146,499 | 2,259,427 | ||||||||
|
Goodwill
|
1,362,071 | 888,793 | ||||||||
|
Intangible
assets, net
|
602,263 | 243,142 | ||||||||
|
Accounts
receivable from Federal Government
|
187,385 | 139,700 | ||||||||
|
Judicial
deposits
|
94,083 | 73,975 | ||||||||
|
Other
non-current assets
|
440,672 | 288,608 | ||||||||
| 6,832,973 | 3,893,645 | |||||||||
|
Total
assets
|
8,994,906 | 5,421,102 | ||||||||
2
|
March
31,
|
March
31,
|
|||||||
|
2010
|
2009 | |||||||
|
Liabilities
and shareholders’ equity
|
||||||||
|
Current
liabilities:
|
||||||||
|
Trade
accounts payable
|
320,044 | 197,220 | ||||||
|
Taxes
payable
|
121,203 | 69,042 | ||||||
|
Salaries
payable
|
79,497 | 40,237 | ||||||
|
Current
portion of long-term debt
|
471,061 | 781,664 | ||||||
|
Derivative
financial instruments
|
43,067 | 28,894 | ||||||
|
Dividends
payable
|
24,696 | - | ||||||
|
Other
liabilities
|
111,971 | 47,641 | ||||||
| 1,171,539 | 1,164,698 | |||||||
|
Long-term
liabilities:
|
||||||||
|
Long-term
debt
|
2,845,667 | 1,251,095 | ||||||
|
Estimated
liability for legal proceedings
|
294,605 | 497,648 | ||||||
|
Taxes
payable
|
381,805 | 151,476 | ||||||
|
Deferred
income taxes
|
408,832 | 40,377 | ||||||
|
Other
long-term liabilities
|
209,402 | 175,043 | ||||||
| 4,140,311 | 2,115,639 | |||||||
|
Shareholders’
equity:
|
||||||||
|
Common shares
class A1, $.01 par value. 1,000,000,000
|
||||||||
|
shares
authorized; 174,355,341 shares issued and
|
||||||||
|
outstanding
|
1,743 | 1,743 | ||||||
|
Common shares
class B1, $.01 par value. 96,332,044 shares
|
||||||||
|
authorized,
issued and outstanding
|
963 | 963 | ||||||
|
Common shares
class B2, $.01 par value. 92,554,316 shares
|
||||||||
|
authorized
|
- | - | ||||||
|
Additional
paid-in capital
|
1,932,117 | 1,926,733 | ||||||
|
Accumulated
other comprehensive income (loss)
|
167,103 | (243,607 | ) | |||||
|
Retained
earnings (accumulated losses)
|
242,264 | (89,595 | ) | |||||
|
Equity
attributable to shareholders of Cosan Ltd
|
2,344,190 | 1,596,237 | ||||||
|
Equity
attributable to noncontrolling interests
|
1,338,866 | 544,528 | ||||||
|
Total
shareholders’ equity
|
3,683,056 | 2,140,765 | ||||||
|
Total
liabilities and shareholders’ equity
|
8,994,906 | 5,421,102 | ||||||
See accompanying
notes to consolidated financial statements.
3
COSAN
LIMITED
Consolidated
statements of operations
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, except share data)
|
March
31,
|
March
31,
|
April
30,
|
||||||||||
|
2010
|
2009
|
2008
|
||||||||||
|
Net
sales
|
8,283,151 | 2,926,460 | 1,491,233 | |||||||||
|
Cost of goods
sold
|
(7,223,265 | ) | (2,621,861 | ) | (1,345,592 | ) | ||||||
|
Gross
profit
|
1,059,886 | 304,599 | 145,641 | |||||||||
|
Selling
expenses
|
(470,322 | ) | (213,257 | ) | (168,623 | ) | ||||||
|
General and
administrative expenses
|
(271,260 | ) | (140,147 | ) | (115,127 | ) | ||||||
|
Operating
income (loss)
|
318,303 | (48,805 | ) | (138,109 | ) | |||||||
|
Other income
(expenses):
|
||||||||||||
|
Financial
income (expenses), net
|
203,680 | (370,806 | ) | 116,767 | ||||||||
|
Gain on tax
recovery program
|
144,857 | - | - | |||||||||
|
Other
|
34,089 | (2,290 | ) | (3,670 | ) | |||||||
|
Income (loss)
before income taxes and equity in
|
700,931 | (421,901 | ) | (25,012 | ) | |||||||
|
income (loss)
of affiliates
|
||||||||||||
|
Income taxes
(expense) benefit
|
(184,781 | ) | 144,690 | 19,810 | ||||||||
|
Income (loss)
before equity in income (loss) of
|
516,150 | (277,211 | ) | (5,202 | ) | |||||||
|
affiliates
|
||||||||||||
|
Equity in
income (loss) of affiliates
|
(10,254 | ) | 6,128 | (239 | ) | |||||||
|
Net income
(loss)
|
505,896 | (271,083 | ) | (5,441 | ) | |||||||
|
Loss (net
income) attributable to noncontrolling
|
||||||||||||
|
interests
|
(174,037 | ) | 82,995 | 22,004 | ||||||||
|
Net income
(loss) attributable to Cosan Ltd.
|
331,859 | (188,088 | ) | 16,563 | ||||||||
|
Per-share
amounts attributable to Cosan Ltd.
|
||||||||||||
|
Earnings
(loss) from continuing operations
|
||||||||||||
|
Basic and
diluted
|
1.23 | (0.76 | ) | 0.09 | ||||||||
|
Weighted
number of shares outstanding
|
||||||||||||
|
Basic and
diluted
|
270,687,385 | 246,868,311 | 174,893,145 | |||||||||
See accompanying
notes to consolidated financial statements.
4
COSAN
LIMITED
Consolidated
statements of shareholders’ equity and comprehensive income
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars, except share data)
| Capital stock | ||||||||||||||||||||||||||||||||||||
|
Accumulated
|
||||||||||||||||||||||||||||||||||||
|
Common
|
Common
|
Common
|
Common
|
Retained
|
other
|
|||||||||||||||||||||||||||||||
|
number
of
|
number
of
|
amount
of
|
amount
of
|
Additional
|
earnings
|
comprehensive
|
||||||||||||||||||||||||||||||
|
class
A
|
class
B
|
class
A
|
class
B
|
paid-in
|
(accumulated
|
income
|
Noncontrolling
|
|||||||||||||||||||||||||||||
|
shares
|
shares
|
shares
|
shares
|
capital
|
losses)
|
(loss)
|
interests
|
Total
|
||||||||||||||||||||||||||||
|
Balances at
April 30, 2007
|
- | 96,332,044 | - | 963 | 354,022 | 81,930 | 36,696 | 463,551 | 937,162 | |||||||||||||||||||||||||||
|
Issuance of
common shares for cash
|
111,678,00 | - | 1,117 | - | 1,117,316 | - | - | 372,955 | 1,491,388 | |||||||||||||||||||||||||||
| 0 | ||||||||||||||||||||||||||||||||||||
|
Public Tender
Offering for Shares
|
18,232,812 | - | 182 | - | 250,774 | - | - | (141,879 | ) | 109,077 | ||||||||||||||||||||||||||
|
Stock
compensation
|
- | - | - | - | 3,466 | - | - | 3,837 | 7,303 | |||||||||||||||||||||||||||
|
Dilution on
exercise of Cosan S.A. stock options
|
- | - | - | - | (2,438 | ) | - | - | 1,629 | (809 | ) | |||||||||||||||||||||||||
|
Net
income
|
- | - | - | - | - | 16,563 | - | (22,004 | ) | (5,441 | ) | |||||||||||||||||||||||||
|
Currency
translation adjustment
|
- | - | - | - | - | - | 135,145 | 118,675 | 253,820 | |||||||||||||||||||||||||||
|
Total
comprehensive income
|
248,379 | |||||||||||||||||||||||||||||||||||
|
Balances at
April 30, 2008
|
129,910,812 | 96,332,044 | 1,299 | 963 | 1,723,140 | 98,493 | 171,841 | 796,764 | 2,792,500 | |||||||||||||||||||||||||||
|
Issuance of
common shares for cash
|
44,444,529 | - | 444 | - | 199,556 | - | - | 7,328 | 207,328 | |||||||||||||||||||||||||||
|
Exercise of
stock options in subsidiary
|
- | - | - | - | - | - | - | 4,770 | 4,770 | |||||||||||||||||||||||||||
|
Issuance of
subsidiary shares to non controlling interest
|
- | - | - | - | - | - | - | 7,670 | 7,670 | |||||||||||||||||||||||||||
|
Stock
compensation
|
- | - | - | - | 4,037 | - | 1,820 | 5,857 | ||||||||||||||||||||||||||||
|
Pension
plan
|
- | - | - | - | - | - | 1,629 | 734 | 2,363 | |||||||||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | (188,088 | ) | - | (82,995 | ) | (271,083 | ) | ||||||||||||||||||||||||
|
Currency
translation adjustment
|
- | - | - | - | - | - | (417,077 | ) | (191,563 | ) | (608,640 | ) | ||||||||||||||||||||||||
|
Total
comprehensive loss
|
- | - | - | - | - | - | - | (877,360 | ) | |||||||||||||||||||||||||||
|
Balances at
March 31, 2009
|
174,355,341 | 96,332,044 | 1,743 | 963 | 1,926,733 | (89,595 | ) | (243,607 | ) | 544,528 | 2,140,765 | |||||||||||||||||||||||||
|
Acquisition of
Teaçu
|
- | - | - | - | 52,651 | - | - | 93,320 | 145,971 | |||||||||||||||||||||||||||
|
Issuance of
subsidiary shares to non controlling interest
|
- | - | - | - | 9,840 | - | (1,735 | ) | 246,123 | 254,228 | ||||||||||||||||||||||||||
|
Acquisition of
non-controlling interest in subsidiary
|
- | - | - | - | (17,739 | ) | - | - | (11,485 | ) | (29,224 | ) | ||||||||||||||||||||||||
|
Sale of
warrants in subsidiary
|
- | - | - | - | (4,594 | ) | - | - | 4,594 | - | ||||||||||||||||||||||||||
|
Exercise of
stock options in subsidiary
|
- | - | - | - | (2,372 | ) | - | (251 | ) | 5,961 | 3,339 | |||||||||||||||||||||||||
|
Exercise of
common stock warrants in subsidiary
|
- | - | - | - | (34,480 | ) | - | 3,441 | 62,232 | 31,192 | ||||||||||||||||||||||||||
|
Acquisition of
TEAS
|
- | - | - | - | - | - | - | 9,075 | 9,075 | |||||||||||||||||||||||||||
|
Stock
compensation
|
- | - | - | - | 2,078 | - | - | 1,241 | 3,319 | |||||||||||||||||||||||||||
|
Net
income
|
- | - | - | - | - | 331,859 | - | 174,037 | 505,896 | |||||||||||||||||||||||||||
|
Pension
plan
|
- | - | - | - | - | - | 18,804 | 11,395 | 30,199 | |||||||||||||||||||||||||||
|
Unrealized
gain on available-for-sale securities
|
- | - | - | - | - | - | 4,258 | - | 4,258 | |||||||||||||||||||||||||||
|
Currency
translation adjustment
|
- | - | - | - | - | - | 386,193 | 197,845 | 584,038 | |||||||||||||||||||||||||||
|
Total
comprehensive income
|
1,124,391 | |||||||||||||||||||||||||||||||||||
|
Balances at
March 31, 2010
|
174,355,341 | 96,332,044 | 1,743 | 963 | 1,932,117 | 242,264 | 167,103 | 1,338,866 | 3,683,056 | |||||||||||||||||||||||||||
See accompanying
notes to consolidated financial statements.
5
COSAN
LIMITED
Consolidated
statements of cash flows
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended April 30,
2008
(In thousands of
U.S. dollars)
|
March
31,
|
March
31,
|
April
30,
|
||||||||||
|
2010
|
2009
|
2008
|
||||||||||
|
Cash flow
from operating activities:
|
||||||||||||
|
Net (loss)
income attributable to Cosan Limited
|
331,859 | (188,088 | ) | 16,563 | ||||||||
|
Adjustments
to reconcile net income to cash provided by operating
|
||||||||||||
|
activities:
|
||||||||||||
|
Depreciation
and amortization
|
488,516 | 290,739 | 236,065 | |||||||||
|
Deferred
income taxes
|
143,322 | (145,328 | ) | (52,438 | ) | |||||||
|
Interest,
monetary and exchange variation
|
(131,448 | ) | 497,342 | (43,684 | ) | |||||||
|
Gain on tax
recovery program
|
(144,857 | ) | - | - | ||||||||
|
Net loss
(income) attributable to noncontrolling interests
|
174,037 | (82,995 | ) | (22,004 | ) | |||||||
|
Others
|
7,600 | 14,465 | 15,248 | |||||||||
|
Decrease/increase
in operating assets and liabilities
|
||||||||||||
|
Trade
accounts receivable, net
|
1,356 | (23,694 | ) | (57,107 | ) | |||||||
|
Inventories
|
126,164 | (85,891 | ) | (31,739 | ) | |||||||
|
Advances to
suppliers
|
37,362 | 21,091 | (8,363 | ) | ||||||||
|
Recoverable
taxes
|
(20,535 | ) | (32,858 | ) | (44,543 | ) | ||||||
|
Trade
accounts payable
|
(26,117 | ) | 33,426 | 33,702 | ||||||||
|
Derivative
financial instruments
|
(111,077 | ) | 4,365 | 90,383 | ||||||||
|
Taxes
payable
|
192,482 | (17,072 | ) | (19,588 | ) | |||||||
|
Other assets
and liabilities, net
|
(257,691 | ) | (28,924 | ) | (54,902 | ) | ||||||
|
Net cash
provided by operating activities
|
810,973 | 256,578 | 57,593 | |||||||||
|
Cash flows
from investing activities:
|
||||||||||||
|
Restricted
cash
|
(18,650 | ) | 29,312 | (25,886 | ) | |||||||
|
Marketable
securities
|
- | 558,761 | (670,980 | ) | ||||||||
|
Proceeds from
sales of the Aviation business
|
58,431 | - | - | |||||||||
|
Proceeds from
sales of property, plant and equipment
|
5,959 | 160,703 | - | |||||||||
|
Additions of
property, plant and equipment
|
(1,081,484 | ) | (606,155 | ) | (642,886 | ) | ||||||
|
Acquisitions,
net of cash acquired and other investments
|
(9,007 | ) | (930,411 | ) | (101,961 | ) | ||||||
|
Net cash used
in investing activities
|
(1,044,751 | ) | (787,790 | ) | (1,441,713 | ) | ||||||
|
Cash flows
from financing activities:
|
||||||||||||
|
Proceeds from
issuance of common stock
|
- | 200,000 | 1,118,433 | |||||||||
|
Capital
increase in subsidiaries from minorities
|
57,405 | 11,247 | 324,351 | |||||||||
|
Treasury
stock
|
- | (1,979 | ) | - | ||||||||
|
Related
parties
|
(85,593 | ) | (15,823 | ) | - | |||||||
|
Payments of
dividends from subsidiaries
|
- | - | (44,935 | ) | ||||||||
|
Additions of
long-term debts
|
2,020,673 | 789,549 | 117,533 | |||||||||
|
Payments of
long-term debts
|
(1,839,524 | ) | (111,079 | ) | (492,052 | ) | ||||||
|
Net cash
provided by financing activities
|
152,961 | 871,915 | 1,023,330 | |||||||||
|
Effect of
exchange rate changes on cash and cash equivalents
|
195,708 | 99,704 | 112,625 | |||||||||
|
Net increase
(decrease) in cash and cash equivalents
|
114,891 | 440,407 | (248,165 | ) | ||||||||
|
Cash and cash
equivalents at beginning of year
|
508,784 | 68,377 | 316,542 | |||||||||
|
Cash and cash
equivalents at end of year
|
623,675 | 508,784 | 68,377 | |||||||||
|
Supplemental
cash flow information
|
||||||||||||
|
Cash paid
for:
|
||||||||||||
|
Interest
|
208,367 | 74,049 | 124,502 | |||||||||
|
Income
taxes
|
33,403 | 3,855 | 18,787 | |||||||||
|
Non-cash
transactions:
|
||||||||||||
|
Acquisitions
paid with equity
|
435,405 | - | 250,774 | |||||||||
See accompanying
notes to consolidated financial statements.
6
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
1.
|
Operations
|
Cosan Limited
(“Cosan” and “the Company”) was incorporated in Bermuda as an exempted company
on April 30, 2007. In connection with its incorporation, Cosan Limited issued
1,000 shares of common stock for US$10.00 to Mr. Rubens Ometto Silveira Mello,
who indirectly controls Cosan S.A. Indústria e Comércio and its subsidiaries
(“Cosan S.A.”).
The companies
included in the consolidated financial statements have as their primary activity
the production of ethanol and sugar, the marketing and distribution of fuel and
lubricants in Brazil, and logistics services in the state of São Paulo, Brazil.
They are constantly pursuing opportunities to capitalize on the growing demand
for ethanol and sugar in the world. They are focused on increasing production
capacity through expansion of existing facilities, development of greenfield
projects and, as opportunities present themselves, acquisitions.
Cosan S.A. was the
predecessor to Cosan and was the primary operating business in the consolidated
group prior to reorganization in August, 2007. In contemplation of an initial
public offering on August 1, 2007, Aguassanta Participações S.A. and Usina Costa
Pinto S.A. Açúcar e Álcool, controlling shareholders of Cosan S.A. and both
indirectly controlled by Mr. Rubens Ometto Silveira Mello, the controlling
shareholder, contributed their common shares of Cosan S.A. to Cosan in exchange
for 96,332,044 of our class B1 common shares. The common shares contributed to
the Company by Aguassanta Participações S.A. and Usina Costa Pinto S.A. Açúcar e
Álcool consisted of 96,332,044 common shares of Cosan, representing 51.0% of
Cosan S.A. outstanding common shares. As a result of this reorganization Cosan
Ltd. became the controlling shareholder of Cosan S.A.. The reorganization was
accounted for as a reorganization of companies under common control in a manner
similar to a pooling of interests.
On August 17, 2007,
the Company concluded its global offering of 111,678,000 class A common shares
which resulted in gross proceeds in the amount of US$1,171,027. As a result of
the global offering, Cosan’s shares are traded on the New York Stock Exchange
(NYSE) and on the São Paulo Stock Exchange (Bovespa) by BDR (Brazilian
Depositary Receipts).
The costs directly
attributable to the offering were charged against the gross proceeds of the
offering in a total amount of US$52,594. Therefore the net proceeds related to
the IPO totaled US$1,118,433.
7
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
1.
|
Operations
(Continued)
|
On April 23, 2008,
Cosan S.A. entered into an agreement with ExxonMobil International Holding B.V.,
or “Exxon”, for the acquisition of 100% of the capital of Esso Brasileira de
Petróleo Ltda. and its subsidiaries (“Essobrás”), a distributor and seller of
fuels and producer and seller of lubricants and specialty petroleum products of
ExxonMobil in Brazil. On December 1, 2008 the Company completed the acquisition
of all of the outstanding shares of Essobrás (see further discussion regarding
this acquisition at Note 8). On January 16, 2009 the Company changed the
corporate name of Essobrás to Cosan Combustíveis e Lubrificantes S.A. (“Cosan
CL”).
On July 17, 2008,
the Board Director’s approved the modification of the end of fiscal year from
April 30 to March 31 of each year. Therefore the consolidated statements of
operations and cash flows presented in these financial statements lack
comparison to the eleven month period ended March 31, 2009.
On August 28, 2008,
Cosan S.A. announced the incorporation of a new affiliate named Radar
Propriedades Agrícolas S.A. (“Radar”), which engages in farm real estate
investments in Brazil. The initial capital contribution was US$185,000, of which
US$35,000 was invested by Cosan (18.92%) and US$150,000 by another shareholder
(81.08%). On August 25, 2009, an additional capital contribution of US$33,262,
was approved, of which US$6,293 (18.92%) was invested by Cosan and the remainder
by the other shareholder. On December 15, 2009, an additional capital
contribution of US$8,944, was approved, of which US$1,692 (18.92%) was invested
by Cosan and the remainder by the other shareholder.
On April 9, 2009,
Cosan S.A. entered into an agreement with Rezende Barbosa S.A. Administração e
Participações (“Rezende Barbosa”) to acquire 100% of the outstanding shares of
Teaçu Armazéns Gerais S.A. (“Teaçu”). Teaçu operates a port terminal concession
in the city of Santos. In connection with this acquisition the Company
concentrated its port concessions in the subsidiary Rumo Logística S.A. See
further discussion regarding this acquisition at Note 8.
On June 17, 2009,
Cosanpar Participações S.A. (“Cosanpar”), a wholly-owned subsidiary of Cosan
S.A. sold its aviation fuel business that was acquired in the Essobrás
acquisition, to Shell Brasil Ltda. for US$58,431 cash. The results of operations
of this business were recorded in the fuel distribution and lubricants segment.
The carrying value of the net assets sold was US$40,084, which resulted in a
gain net of taxes of US$19,150.
8
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
1.
|
Operations
(Continued)
|
On June 18, 2009,
Cosan S.A. entered into an agreement with Rezende Barbosa to acquire 100% of the
outstanding shares of Curupay S.A. Participações (“Curupay”). The principal
investment of Curupay was 100% of the outstanding shares of Cosan Alimentos S.A.
(former Nova América S.A. Agroenergia). Cosan Alimentos S.A. ( “Cosan
Alimentos”) is a producer of sugar, ethanol and energy co-generation which also
operates in trading and logistics. See further discussion regarding this
acquisition at Note 8.
On November 24,
2009, Cosan S.A. entered into an agreement with Crystalsev Comércio e
Representação Ltda and Plínio Nastari Consultoria e Participações Ltda to
acquire 26,7% of the outstanding shares of TEAS Terminal Exportador de Álcool de
Santos S.A. (“TEAS”). As a result, this increased its ownership percentage from
40,0% to 66,7% of the TEAS’s capital. TEAS operates a port terminal concession
in the city of Santos. See further discussion regarding this acquisition at Note
8.
On November 12,
2009, the Company, through its subsidiary Rumo Logística S.A., acquired a 14.28%
interest in Logispot, represented by 166,590 common shares, for $11,606 cash.
Logispot is a logistics hub and warehouse based in the city of
Sumaré.
On February 1,
2010, the Company announced that it, along with Royal Dutch Shell, had reached a
non-binding memorandum of understanding, to expire in 180 days, to form a joint
venture for a combined 50/50 investment. Cosan will contribute its sugar and
ethanol and its distribution assets to the joint venture while Shell will
contribute its distribution assets in Brazil. Shell will also make a fixed cash
contribution in the amount of US$1,625 billion over a 2 year period. The closing
of this transaction is dependent upon the conclusion of the
negotiations.
9
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
2.
|
Presentation
of the consolidated financial
statements
|
Basis
of presentation
The consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles in the United States (“U.S. GAAP”), which differs in
certain respects from accounting principles generally accepted in Brazil (
“Brazilian GAAP”), which Cosan S.A. uses to prepare its statutory consolidated
financial statements as filed with the Brazilian Securities Commission - CVM (
“Comissão de Valores Mobiliários”).
The functional
currency and the reporting currency of Cosan is the U.S. dollar. The Brazilian
real is the currency of the primary economic environment in which Cosan S.A. and
its subsidiaries located in Brazil operate and generate and expend cash and is
the functional currency, except for the foreign subsidiaries in which U.S.
dollar is the functional currency. However, Cosan S.A. utilizes the U.S. dollar
as its reporting currency. The accounts of Cosan S.A. are maintained in
Brazilian reais, which have been translated into U.S. dollars in accordance with
Accounting Standards Codification (“ASC”) 830 “Foreign Currency Matters”.
The assets and liabilities are translated from reais to U.S. dollars using the
official exchange rates reported by the Brazilian Central Bank at the balance
sheet date and revenues, expenses, gains and losses are translated using the
average exchange rates for the period. The translation gain or loss is included
in the accumulated other comprehensive income component of shareholders’ equity,
and in the statement of comprehensive income (loss) for the period in accordance
with the criteria established in ASC 220 “Comprehensive
Income”.
The exchange rate
of the Brazilian real (R$) to the U.S. dollar (US$) was R$1,7810=US$1.00 at
March 31, 2010, R$2.3152=US$1.00 at March 31, 2009 and R$1.6872=US$1.00 at April
30, 2008.
|
3.
|
Significant
accounting policies
|
a. Principles of
consolidation
The consolidated
financial statements include the accounts and operations of Cosan and its
subsidiaries. All significant intercompany accounts and transactions are
eliminated upon consolidation.
10
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting policies
(Continued)
|
The following
subsidiaries were included in the consolidated financial statements for the year
ended March 31, 2010, eleven-month period ended March 31, 2009 and the year
ended April 30, 2008.
|
Ownership
% direct and indirect
|
||||||||||||
|
2010
|
2009
|
2008
|
||||||||||
|
Cosan S.A.
Indústria e Comércio
|
62.27 | % | 62.27 | % | 62.27 | % | ||||||
|
Administração
de Participações Aguassanta Ltda.
|
56.98 | % | 56.98 | % | 56.98 | % | ||||||
|
Cosan S.A.
Açúcar e Álcool (1)
|
62.02 | % | 62.02 | % | ||||||||
|
Aguas da
Ponta Alta S.A.
|
62.02 | % | 62.02 | % | ||||||||
|
Vale da Ponte
Alta S.A.
|
62.02 | % | 62.02 | % | ||||||||
|
Agrícola
Ponte Alta S.A.
|
62.02 | % | 62.02 | % | 61.71 | % | ||||||
|
Cosan
Centroeste S.A. Açúcar e Álcool
|
62.02 | % | 62.02 | % | 61.71 | % | ||||||
|
Barra S.A.
Bioenergia
|
62.02 | % | 62.02 | % | 61.71 | % | ||||||
|
DaBarra
Alimentos Ltda.
|
62.02 | % | 62.02 | % | 61.71 | % | ||||||
|
Bonfim Nova
Tamoio – BNT Agrícola Ltda.
|
62.02 | % | 62.02 | % | 61.71 | % | ||||||
|
Benálcool
S.A. Açúcar e Álcool
|
62.02 | % | 62.02 | % | 61.71 | % | ||||||
|
Barrapar
Participações S.A.
|
62.02 | % | 62.02 | % | ||||||||
|
Aliança
Indústria e Comércio de Açúcar e Álcool S.A.
|
62.02 | % | 62.02 | % | ||||||||
|
Cosan
Distribuidora de Combustíveis Ltda.
|
62.21 | % | 62.27 | % | 62.21 | % | ||||||
|
Cosan S.A.
Bioenergia
|
62.27 | % | 62.27 | % | 62.27 | % | ||||||
|
Cosan
International Universal Corporation
|
62.27 | % | 62.27 | % | 62.27 | % | ||||||
|
Cosan Finance
Limited
|
62.27 | % | 62.27 | % | 62.27 | % | ||||||
|
Grançucar
S.A. Refinadora de Açúcar
|
62.27 | % | 62.27 | % | 62.27 | % | ||||||
|
Cosanpar
Participações S.A. (2)
|
- | 62.27 | % | - | ||||||||
|
Cosan
Combustíveis e Lubrificantes S.A.
|
62.27 | % | - | - | ||||||||
|
Copsapar
Participações S.A.
|
56.04 | % | 56.04 | % | - | |||||||
|
Novo Rumo
Logística S.A.
|
57.85 | % | - | - | ||||||||
|
Rumo
Logística S.A.
|
57.85 | % | - | - | ||||||||
|
Cosan
Operadora Portuária S.A.
|
57.85 | % | 57.85 | % | - | |||||||
|
Teaçú
Armazéns Gerais S.A.
|
57.85 | % | - | - | ||||||||
|
Teas Terminal
Exportador de Álcool de Santos S.A. (3)
|
41.53 | % | 19.83 | % | - | |||||||
|
Cosan
Alimentos S.A. (formerly known as Nova América S.A. –
|
62.27 | % | - | - | ||||||||
|
Agroenergia)
|
||||||||||||
|
Pasadena
Empreendimentos e Participações S.A. (4)
|
- | - | - | |||||||||
(1) Usina da Barra
S/A Açúcar e Álcool was renamed as Cosan S/A Açucar e Alcool;
(2) In June 23,
2009, Cosan CL incorporated the Cosanpar Participações S/A.; and
(3) Increase of
stockholding with acquisition of control (see Note 8).
(4) Immaterial
special purpose entity controlled by the Company
11
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting policies
(Continued)
|
b.
Revenue recognition
Cosan recognizes
revenue when title passes to the customer. This is date of shipment when shipped
FOB shipping point and date of receipt by customer for certain export sales,
which are shipped FOB destination. Selling prices are fixed based on purchase
orders or contractual arrangements. Revenue for fuel distribution is recognized
when products are delivered to the service station or customer. Provision is
made for estimated returns.
Shipping and
handling costs are classified as selling expenses in the consolidated statement
of income. The shipping and handling costs as of March 31, 2010 amounted to
US$179,956 (US$162,927 as of March 31, 2009 and US$165,016 as of April 30,
2008).
Sales incentives on
fuel distribution are volume-based incentives and are recognized as a reduction
of revenue.
Sales revenue
includes taxes collected from customers in the amount of US$420,780 as of March
31, 2010 (US$219,933 as of March 31, 2009 and US$125,848 as of April 30,
2008).
c.
Advertising and sales promotion costs
Advertising and
sales promotion costs: are recognized when incurred and amounted to US$25,027 as
of March 31, 2010 (US$4,079 as of March 31, 2009 and US$1,284 as of April 30,
2008).
d.
Use of estimates
The preparation of
consolidated financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual results
could differ from these estimates. These estimates and assumptions are reviewed
and updated regularly to reflect recent experience.
12
|
3.
|
Significant accounting policies
(Continued)
|
e.
Cash and cash equivalents
Cosan considers all
highly liquid investments with a maturity of three months or less when purchased to
be cash equivalents. Excess cash and cash equivalents are invested in
short-term, highly liquid money market funds.
f.
Restricted cash
The restricted cash
amounts are related to deposits of margin requirements with commodities brokers
that trade Cosan’s derivative instruments.
g.
Trade accounts receivable and allowance for doubtful accounts
Trade accounts
receivable are recorded at estimated net realizable value and do not bear
interest. The allowance for doubtful accounts is recorded at an amount
considered sufficient to cover estimated losses arising on collection of
accounts receivable.
h.
Inventories
Inventories are
valued at the lower of cost or market through average cost of production or
acquisition. Cost for finished goods and work-in-progress includes purchased raw
materials, labor, maintenance costs of growing crops, depreciation of major
maintenance costs and manufacturing and production overhead, which are related
to the purchase and production of inventories.
During the
development period of growing crops, costs are recorded in property, plant and
equipment. After the development period, annual maintenance costs of growing
crops become a portion of the cost of the current-year crop, along with
harvesting costs, depreciation of the plants, and allocated overhead costs.
Annual maintenance costs include cultivation, spraying, pruning, and
fertilizing. The annual maintenance costs are allocated to cost of production
based on the amount of sugarcane milled during the harvest period.
Cosan’s harvest
period in Brazil begins between the months of March and April each year and
ceases normally in the months of November and December. From January to April
Cosan performs its major maintenance activities, as described at item j
below.
13
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting policies
(Continued)
|
i.
Investment in affiliated companies
Investments in
affiliates in which Cosan exercises significant influence over the operating and
financial policies are accounted for using the equity method.
j.
Property, plant and equipment
Property, plant and
equipment are recorded at cost of acquisition, formation or construction,
including interest incurred on financing. During the period of construction,
costs include land preparation, plants, preparation of planting beds, stakes and
wires, cultural care during the development period, and overhead. Amortization
of sugarcane plants is calculated using the straight-line method at a rate of
20% per annum as Cosan harvests these plants during a five-year average
period.
Depreciation is
calculated using the straight-line method at rates that take into account the
estimated useful life of the assets: 25 years for buildings; 10 years for
machinery and equipment; 7 years for furniture, fixtures and computer equipment;
5 years for vehicles; 25 years for leasehold improvements; and 5 years for
sugarcane plant development costs.
Cosan performs
planned major maintenance activities in its industrial facilities on an annual
basis. This generally occurs during the months from January to March, with the
purpose to inspect and replace components. The annual major maintenance costs
include labor, material, outside services, and general or overhead expense
allocations during the inter-harvest period. Cosan utilizes the built-in
overhaul method to account for the annual costs of major maintenance activities.
Thus the estimated cost of the portion of the total cost of a fixed asset which
must be replaced on an annual basis is recorded as a separate component of the
cost of fixed assets and depreciated over its separate estimated useful life. It
is then replaced in connection with the annual major maintenance activities.
Costs of normal periodic maintenance are charged to expense as incurred since
the parts replaced do not enhance or maintain the crushing capacity or provide
betterments to the fixed assets.
Impairment of
long-lived assets is recognized when events or changes in circumstances indicate
that the carrying amount of an asset or group of assets may not be recoverable.
If the expected future undiscounted cash flows are less than the carrying amount
of the asset, an impairment loss is recognized at that time to reduce the asset
to the lower of its fair value or its net book value.
14
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30, 2008\(In
thousands of U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting policies
(Continued)
|
k.
Asset retirement obligations
Retirement of
long-lived assets is accounted for in accordance with ASC 410 “Accounting for Asset Retirement
Obligations”. The retirement obligations of the subsidiary Cosan CL
relate to the legally required obligation to remove underground fuel tanks upon
retirement, the initial measurement of which is recognized as a liability
discounted to present values and subsequently accreted through earnings. An
asset retirement cost equal to the initial estimated liability is capitalized as
part of the related asset’s carrying value and depreciated over the asset’s
useful life.
l.
Goodwill and other intangible assets
Cosan tests
goodwill and indefinite-lived intangible assets for impairment annually during
the fourth quarter after the annual forecasting process is completed.
Furthermore, goodwill is reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value may not be
recoverable.
m.
Environmental matters
Cosan’s production
facilities and its plantation activities in Brazil are both subject to
environmental regulations. Cosan diminishes the risks associated with
environmental matters, through operating procedures and controls and investments
in pollution control equipment and systems. Cosan believes that no provision for
losses related to environmental matters is currently required, based on existing
Brazilian laws and regulations.
15
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting policies
(Continued)
|
n.
Estimated liability for legal proceedings and labor claims
Determination of
the estimated liability for legal proceedings and labor claims involves
considerable judgment on the part of management. In accordance with ASC 450,
“Accounting for
Contingencies”, a contingency is an existing condition, situation, or set
of circumstances involving uncertainty as to possible gain or loss to an
enterprise that will ultimately be resolved when one or more future events occur
or fail to occur. Cosan is subject to various claims, legal, civil and labor
proceedings covering a wide range of matters that arise in the ordinary course
of business activities. Cosan accrues such liabilities when it determines that
losses are probable and can be reasonably estimated. The balances are adjusted
to account for changes in circumstances in ongoing issues and the establishment
of additional reserves for emerging issues. Actual results could differ from
estimates.
o.
Income taxes
Deferred income
taxes are recognized for the differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carryforwards.
In accordance with
ASC 740, “Accounting for
Uncertainty in Income Taxes”, the Company recognizes the effect of income
tax positions only if those positions are more likely than not of being
sustained. Recognized income tax positions are measured at the largest amount
that is greater than a 50% likelihood of being realized. Changes in recognition
or measurement are reflected in the period in which the change in estimate
occurs.
The Company records
interest related to unrecognized tax benefits in interest expense and penalties
in financial expenses.
Valuation
allowances are established when management determines that it is more likely
than not that the deferred tax assets will not be realized.
16
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30, 2008 (In
thousands of U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting policies
(Continued)
|
p.
Earnings (losses) per share
Earnings (losses)
per share are computed by dividing net income by the weighted average number of
common shares outstanding during the year. Diluted earnings per share are
calculated by adjusting average outstanding shares for the impact of conversion
of all potentially dilutive options.
q.
Share-based compensation
Cosan S.A.’s share
based compensation plan, which was adopted on August 30, 2005, is accounted for
in accordance with ASC 718, Share-Based Payments, which
requires it to recognize expense related to the fair value of its share-based
compensation awards. Compensation expense for all share-based compensation
awards granted was based on the grant-date fair value estimated in accordance
with the provisions of ASC 718 and the expense has been recognized for share
based awards on a straight-line basis over the requisite service period of the
award. For purpose of estimating the fair value of options on their date of
grant, Cosan S.A. uses a binomial model.
r.
Derivative financial instruments
Cosan accounts for
derivative financial instruments utilizing ASC 815, “Accounting for Derivative
Instruments and Hedging Activities”, as amended. As part of Cosan’s risk
management program, it uses a variety of financial instruments, including
commodity futures contracts, forward currency agreements, interest rate and
foreign exchange swap contracts and option contracts. Cosan recognizes all
derivative instruments as non-hedge transactions. The derivative instruments are
measured at fair value and the gains or losses resulting from the changes in
fair value of the instruments are recorded in financial income or financial
expense.
17
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30, 2008 (In
thousands of U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting policies
(Continued)
|
s.
Fair Value Measurements
On May 1, 2008,
Cosan adopted the provisions of ASC 820, “Fair Value Measurements and
Disclosures”, for fair value measurements of financial assets and
financial liabilities and for fair value measurements of non-financial assets
and liabilities items that are recognized or disclosed at fair value in the
financial statements on a recurring basis. ASC 820 defines fair value as the
price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. ASC
820 also establishes a framework for measuring fair value and expands
disclosures about fair value measurements.
t.
Recently adopted accounting standards
FASB Accounting Standards
Codification
In September 2009,
the Accounting Standards Codification (“ASC”) became the source of authoritative
U.S. GAAP recognized by the Financial Accounting Standards Board (“FASB”) for
nongovernmental entities, except for certain FASB Statements not yet
incorporated into ASC. Rules and interpretive releases of the SEC under federal
securities laws are also sources of authoritative U.S. GAAP for registrants. The
authoritative guidance mentioned in these financial statements includes the
applicable ASC reference.
Subsequent
Events
The Company,
adopted ASC 855, “Subsequent
Events”, which established general accounting standards and disclosure
for subsequent events, during the year ended March 31, 2010.
18
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting policies
(Continued)
|
t.
Recently adopted accounting standards (continued)
Noncontrolling
Interests
Effective April 1,
2009, the Company adopted new accounting guidance ASC 810, “Consolidation”, which changed
the accounting for and the reporting of an entity’s minority ownership. Such
minority ownership, previously referred to as minority interest, is now referred
to as noncontrolling interests. The adoption of this guidance resulted in the
reclassification of amounts previously attributable to minority interest and
classified in the mezzanine outside of shareholders’ equity, to a separate
component of shareholders’ equity titled “Noncontrolling Interests” in the
consolidated balance sheets and statement of changes in shareholders’ equity and
comprehensive income (loss).
Additionally, net
income and comprehensive income attributable to noncontrolling interests are
shown separately from consolidated net income and comprehensive income in the
consolidated statements of operations and statements of changes in shareholders’
equity and comprehensive income (loss). Prior period financial statements have
been reclassified to conform to the current year presentation as required by ASC
810.
u.
New Accounting Pronouncements
In January 2010,
the FASB issued ASU 2010-06, Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value
Measurements, which will require companies to make new disclosures about
recurring or nonrecurring fair value measurements including significant
transfers into and out of Level 1 and Level 2 fair value hierarchies and
information on purchases, sales, issuance and settlements on a gross basis in
the reconciliation of Level 3 fair value measurements. The ASU is effective
prospectively for financial statements issued for fiscal years and interim
periods beginning after December 15, 2009. The new disclosures about purchases,
sales, issuance and settlements on a gross basis in the reconciliation of Level
3 fair value measurements is effective for interim and annual reporting periods
beginning after December 15, 2010. The Company expects that the adoption of ASU
2010-06 will not have a material impact on its consolidated financial
statements.
19
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
3.
|
Significant accounting policies
(Continued)
|
u.
New Accounting Pronouncements (continued)
In June 2009, the
FASB issued Statement of Financial Accounting Standards No. 167, Amendments to Financial Accounting
Standards Board Interpretation No. 46(R), included in ASC Subtopic
810-10, Consolidations —
Overall. This guidance is intended to improve financial reporting by
enterprises involved with variable interest entities by requiring ongoing
reassessments of whether an enterprise is the primary beneficiary of a variable
interest entity and addresses concerns regarding the timely and usefulness of
information about an enterprise’s involvement in a variable interest entity.
This guidance is effective for interim and annual reporting periods beginning
after November 15, 2009, with early application prohibited. The Company does not
believe the adoption will have a material impact on its consolidated financial
statements.
|
4.
|
Cash
and cash equivalents
|
|
2010
|
2009
|
|||||||
|
Local
currency
|
||||||||
|
Cash and bank
accounts
|
59,513 | 64,644 | ||||||
|
Highly liquid
investments
|
492,430 | 422,989 | ||||||
|
Foreign
currency
|
||||||||
|
Bank
accounts
|
71,732 | 21,151 | ||||||
| 623,675 | 508,784 | |||||||
|
5.
|
Derivative
financial instruments
|
Cosan uses
derivative financial instruments to manage its exposure related to sugar price
variations in the international market, interest rate and exchange rate
variation. The instruments are commodity futures contracts, forward currency
agreements, interest rate and foreign exchange swap contracts, and option
contracts. Cosan recognizes all derivatives on the balance sheet at fair value
through profit or loss.
Cosan does not have
any derivatives that are designated as hedging instruments as of March 31,
2010.
20
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
5.
|
Derivative financial
instruments (continued)
|
The following table
summarizes the notional value of derivative financial instruments as well as the
related amounts recorded in balance sheet accounts:
|
Balance
sheet location
|
Notional
amounts
|
Carrying
value asset (liability)
|
|||||||||||||||
|
Derivative
Financial
|
March
31,
|
March
31,
|
March
31,
|
March
31,
|
|||||||||||||
|
Instruments
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Commodities
derivatives
|
|||||||||||||||||
|
Future
contracts:
|
|||||||||||||||||
|
Purchase
commitments - sugar
|
Current
assets (liabilities)
|
102,725 | 61 | (19,128 | ) | (4 | ) | ||||||||||
|
Sell
commitments
|
Current
assets
|
558,385 | 182,943 | 82,229 | 4,163 | ||||||||||||
|
Swap
agreements
|
Current
assets
|
56,594 | - | 607 | - | ||||||||||||
|
Options:
|
|||||||||||||||||
|
Purchased
|
Current
assets
|
145,517 | - | 12,777 | - | ||||||||||||
|
Written
|
Current
assets (liabilities)
|
457,841 | 64,366 | (19,362 | ) | (2,906 | ) | ||||||||||
|
Foreign
exchange and interest rate
|
|||||||||||||||||
|
derivatives
|
|||||||||||||||||
|
Forward
contracts:
|
|||||||||||||||||
|
Sale
commitments
|
Current
assets (liabilities)
|
573,250 | 184,653 | 4,490 | (23,035 | ) | |||||||||||
|
Purchase
commitments
|
Current
assets (liabilities)
|
571,500 | - | (4,226 | ) | - | |||||||||||
|
Swap
agreements:
|
|||||||||||||||||
|
Senior
notes
|
Current
(liabilities)
|
- | 246,501 | - | (2,949 | ) | |||||||||||
|
Interest
Libor
|
Current
assets (liabilities)
|
300,000 | - | (351 | ) | - | |||||||||||
|
Future
contracts
|
|||||||||||||||||
|
Sale
commitments
|
Current
assets
|
487,800 | 372,230 | 20,527 | 3,189 | ||||||||||||
|
Options
|
|||||||||||||||||
|
Purchased
|
Current
assets
|
372,568 | - | 8,826 | - | ||||||||||||
|
Total
assets
|
129,456 | 7,352 | |||||||||||||||
|
Total
liabilities
|
(43,067 | ) | (28,894 | ) | |||||||||||||
|
6.
|
Inventories
|
|
2010
|
2009
|
|||||||
|
Finished
goods:
|
||||||||
|
Sugar
|
52,561 | 47,195 | ||||||
|
Ethanol
|
31,573 | 86,809 | ||||||
|
Lubricants
and Fuel (Gasoline, Diesel and Ethanol)
|
149,613 | 120,108 | ||||||
| 233,747 | 254,112 | |||||||
|
Annual
maintenance cost of growing crops
|
243,709 | 167,576 | ||||||
|
Others
|
110,264 | 56,104 | ||||||
| 587,720 | 477,792 |
21
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30, 2008 (In
thousands of U.S. dollars, unless otherwise stated)
|
7.
|
Property,
plant and equipment, net
|
|
2010
|
2009
|
|||||||
|
Land and
rural properties
|
506,627 | 401,074 | ||||||
|
Machinery,
equipment and installations
|
2,759,044 | 1,285,524 | ||||||
|
Vehicles
|
168,875 | 123,867 | ||||||
|
Furniture,
fixtures and computer equipment
|
71,254 | 44,600 | ||||||
|
Buildings
|
580,160 | 229,322 | ||||||
|
Leasehold
improvements and others
|
264,693 | 153,432 | ||||||
|
Construction
in progress
|
811,395 | 395,200 | ||||||
|
Sugarcane
plant development costs
|
807,757 | 655,306 | ||||||
| 5,969,805 | 3,288,325 | |||||||
|
Accumulated
depreciation and amortization
|
(1,823,306 | ) | (1,028,898 | ) | ||||
|
Total
|
4,146,499 | 2,259,427 | ||||||
|
8.
|
Acquisitions
|
a. Teaçu
Armazéns Gerais S.A.
On April 9, 2009,
Cosan S.A., through its 90% owned subsidiary, Copsapar Participações S.A., which
owns 100% of Novo Rumo Logística S.A. (“Novo Rumo”), acquired 100% of the
outstanding shares of Teaçu Armazéns Gerais S.A. (“Teaçu”) from Rezende Barbosa
S.A. Administração e Participações (“Rezende Barbosa”) for $52,985 cash and
issuance of 90,736,131 shares of Novo Rumo, equivalent to 28.82% of its share
capital. Teaçu holds a port concession in the city of Santos and operates a
terminal dedicated to exporting sugar and other agricultural products. This
acquisition combines the Santos port operations previously held separately by
Cosan S.A. and Teaçu.
As a result of this
transaction, Cosan S.A. reduced its indirect share ownership in Novo Rumo to
64.06%.
The
acquisition-date fair value of the consideration transferred totaled $167,303,
which consisted of the following:
|
Cash
|
52,985 | |||
|
Common stock
at fair value
|
114,318 | |||
|
Total
consideration transferred
|
167,303 |
22
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year
ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
In the absence of a
quoted market price, the fair value of common stock included in the
consideration transferred was calculated using an income approach using the
present value of estimated future net cash flows.
The following table
summarizes the estimated fair values of the assets acquired and liabilities
assumed at the acquisition date. The Company has finalized the allocation of the
consideration transferred as of March 31, 2010.
a. Teaçu Armazéns Gerais S.A.
(Continued)
|
Description
|
||||
|
Property,
plant and equipment
|
44,417 | |||
|
Intangible
assets
|
138,424 | |||
|
Inventories
|
1,209 | |||
|
Other
assets
|
26,566 | |||
|
Long-term
debt including current installments
|
(18,933 | ) | ||
|
Trade
accounts payable
|
(485 | ) | ||
|
Estimated
liability for legal proceedings and labor claims
|
(3,289 | ) | ||
|
Deferred
income taxes
|
(45,523 | ) | ||
|
Other
liabilities
|
(3,117 | ) | ||
|
Net assets
acquired
|
139,269 | |||
|
Consideration
transferred, net of cash acquired
|
167,008 | |||
|
Goodwill
|
27,739 | |||
The goodwill of
$27,739 arising from the acquisition, which will be substantially deductible for
tax purposes and consists largely of the synergies and economies of scale
expected from combining the port operations of Cosan S.A. and Teaçu. The
goodwill was assigned to the Sugar Logistics operating segment.
23
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
a. Teaçu
Armazéns Gerais S.A.
(Continued)
The purchase price
to acquire Teaçu was allocated based on the fair value of the assets acquired
and liabilities assumed. The Company obtained an independent valuation of its
property, plant and equipment, intangible assets, long-term debt, and internally
determined the fair value of its other assets and liabilities. The initial
purchase price allocation has been adjusted primarily as a result of refinements
in the Company’s assumptions relating to property, plant and equipment,
intangible assets and other assets and liabilities. These adjustments have
resulted in a change in the determination of the amounts of deferred taxes upon
the completion of the valuation. As a result of these changes, goodwill, as
previously disclosed, has been changed as follows:
|
Provisional
goodwill
|
102,052 | |||
|
Intangible
assets – port concession granted by the government
|
(138,424 | ) | ||
|
Adjustments
of fair value of PP&E
|
(4,193 | ) | ||
|
Adjustments
of fair value of other assets and liabilities
|
4,051 | |||
|
Deferred
income tax
|
47,467 | |||
|
Change in
consideration transferred of common stock at fair value
|
16,786 | |||
|
Goodwill
|
27,739 |
b. Curupay S.A.
Participações
On June 18, 2009,
Cosan S.A. acquired 100% of the outstanding shares of Curupay S.A. Participações
from Rezende Barbosa, through the issuance of 44,300,389 common shares valued at
$7.25 per share (fair value at the acquisition date) and a total consideration
transferred of US$321,087. The assets acquired include the non-controlling
interest in Novo Rumo representing 28.82% of its outstanding shares which were
issued in the Teaçu acquisition, and 100% of the outstanding shares of two
operating companies, Nova América S.A. Trading and Cosan Alimentos (collectively
referred to as “Nova América”). Nova América is a producer of sugar, ethanol and
energy co-generation and also operates in trading and logistics.
With the
acquisition of the noncontrolling interest of Novo Rumo, Cosan S.A. increased
its share ownership in Novo Rumo to 92.88%. This transaction was a change in
ownership interest without a loss of control and accounted for as a transaction
in shareholders’ equity of Cosan S.A.
24
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
b. Curupay
S.A. Participações
(continued)
The following table
summarizes the assets acquired and liabilities assumed in relation to Nova
América. These amounts are final as valuations of intangible assets, fixed
assets and other assets and liabilities were concluded as of March 31,
2010.
|
Description
|
||||
|
Property,
plant and equipment
|
455,651 | |||
|
Intangible
assets
|
125,491 | |||
|
Noncontrolling
interest in Novo Rumo
|
68,180 | |||
|
Inventories
|
61,323 | |||
|
Account
receivables
|
62,215 | |||
|
Recoverable
taxes
|
12,527 | |||
|
Related
parties
|
34,846 | |||
|
Other
assets
|
100,555 | |||
|
Long-term
debt including current installments
|
(604,234 | ) | ||
|
Trade
accounts payable
|
(80,936 | ) | ||
|
Estimated
liability for legal proceedings and labor claims
|
(10,461 | ) | ||
|
Taxes and
contributions payable
|
(28,821 | ) | ||
|
Deferred
income taxes
|
(24,359 | ) | ||
|
Other
liabilities
|
(64,802 | ) | ||
|
Net assets
acquired
|
107,175 | |||
|
Consideration
transferred, net of cash acquired
|
294,605 | |||
|
Goodwill
|
187,430 | |||
The goodwill of
$187,430 arising from the acquisition was assigned to the Sugar and Ethanol
segment.
25
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
b. Curupay
S.A. Participações
(continued)
The purchase price
to acquire Curupay was allocated based on the fair value of the assets acquired
and liabilities assumed. The Company obtained an independent valuation of its
property, plant and equipment, intangible assets, long-term debt, and internally
determined the fair value of its other assets and liabilities. The initial
purchase price allocation has been adjusted primarily as a result of refinements
in the Company’s assumptions relating to property, plant and equipment,
intangible assets and other assets and liabilities. These adjustments have
resulted in a change in the determination of the amounts of deferred taxes upon
the completion of the valuation. As a result of these changes, goodwill, as
previously disclosed, has been changed as follows:
|
Provisional
goodwill
|
290,519 | |||
|
Intangible
assets – Trademark (“União”) and Purchase Contracts
|
(125,491 | ) | ||
|
Adjustments
of fair value of PP&E
|
(85,000 | ) | ||
|
Adjustments
of fair value of recoverable taxes
|
9,569 | |||
|
Adjustments
of fair value of receivables
|
33,669 | |||
|
Adjustments
of fair value of other assets and liabilities
|
(3,171 | ) | ||
|
Deferred
income tax
|
67,335 | |||
|
Goodwill
|
187,430 |
c. TEAS Terminal Exportador
de Álcool de Santos S.A.
On November 24,
2009, the Company acquired, for US11,574 cash, an additional 26.7% interest,
represented by 10,527,295 common shares, of TEAS Terminal Exportador de Álcool
de Santos S.A. (“TEAS”) from Crystalsev Comércio e Representação Ltda and Plínio
Nastari Consultoria e Participações Ltda. As a result of this transaction, Cosan
S.A. increased its direct share ownership in TEAS from 40.0% to 66.7% and
obtained control of TEAS. TEAS holds a port concession in the city of Santos and
operates a terminal dedicated to exporting ethanol.
26
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
c. TEAS
Terminal Exportador de Álcool de Santos S.A.—(continued)
The acquisition
date fair value of the consideration transferred totaled US$22,800, which
consisted of the following:
|
Cash
|
11,574 | |||
|
Acquisition
date fair value of initial 40% investment
|
11,226 | |||
|
Total
|
22,800 |
The following table
summarizes the fair values of the assets acquired and liabilities assumed at the
acquisition date. The company is in the process of analyzing the necessity to
obtain valuations of certain intangible assets and fixed assets; thus, the
provisional measurements of intangible assets, fixed assets and goodwill are
subject to change.
|
Description
|
||||
|
Property,
plant and equipment
|
12,089 | |||
|
Other
assets
|
489 | |||
|
Trade
accounts payable
|
(74 | ) | ||
|
Other
liabilities
|
(206 | ) | ||
|
Non-controlling
interest
|
(3,574 | ) | ||
|
Net assets
acquired
|
8,724 | |||
|
Consideration
transfered, net of cash acquired
|
12,917 | |||
|
Goodwill
|
4,193 | |||
The provisional
goodwill of US$4,193 arising from the acquisition consists largely of the
synergies and economies of scale expected from combining the Ethanol operations
of Cosan S.A. and TEAS. The provisional goodwill was assigned to Sugar and
Ethanol operating segment.
27
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
d. Logispot Armazens Gerais Ltda.
(“Logispot”)
On November 12,
2009, Cosan S.A., through its subsidiary Rumo Logística S.A., acquired a 14.28%
interest in Logispot, represented by 166,590 common shares, for US$11,606 cash.
Logispot is a logistics hub and warehouse based in the city of
Sumaré.
e. Cosan CL (formerly
Essobrás)
On December 1,
2008, Cosan S.A. and its subsidiary Usina da Barra S.A. Açúcar e Álcool (“Usina
da Barra”), through Cosan S.A.’s subsidiary Cosanpar Participações Ltda.
(“Cosanpar”), acquired, for US$714,353 cash and US$8,289 in transaction costs,
100 percent of the outstanding shares of Cosan CL, a distributor in Brazil of
oil products, ethanol, lubricants, and aviation fuel as well as an operator of
convenience stores. The network of service stations to which Cosan CL
distributes such products is comprised of more than 1,500 service stations. The
results of Cosan CL operations have been included in the consolidated financial
statements since the acquisition date.
As additional
consideration for the purchase, Cosan will pay to the sellers as a contingent
payment an amount based on a percentage of gross revenues of Cosan CL and other
amounts based on the quantity of barrels of some ExxonMobil products sold during
a 10 year period. These contingent payments will be recorded as additional cost
of the acquired entity when the contingency is resolved.
The liabilities
assumed in the acquisition include Notes issued by Cosan CL on December 16, 1999
and December 10, 1999 pursuant to a Note Purchase Agreement dated December 8,
1999, as amended, in the aggregate principal amount of US$175,000, plus accrued
interest on such amount which was held by ExxonMobil Capital N.V.
28
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
e. Cosan CL
(formerly Essobrás)
(continued)
From March 1992
until December 2001 Cosan CL did not pay the COFINS tax levied on sales or this
tax was paid and used to offset or otherwise applied against other taxes on the
sale of fuels and other oil derivatives which have been discussed with the
taxing authorities. During this period Cosan CL has made judicial deposits,
which are restricted cash placed on deposit with the court and are held in
judicial escrow for certain COFINS cases. The sellers have agreed to indemnify
Cosan for any COFINS matters and any losses related thereto if Cosan CL loses
these proceedings. If Cosan CL wins the proceedings, Cosan must pay the judicial
deposits and related interest to the sellers. Provision for contingencies net of
judicial deposits in the amount of US$18,468 related to this matter, is included
in net assets acquired.
The following table
summarizes the estimated fair value of assets acquired and liabilities assumed
in the acquisition:
|
Cosan
CL
|
||||
|
Description
|
US$
|
|||
|
Trade
accounts receivable
|
134,634 | |||
|
Inventories
|
141,167 | |||
|
Property,
plant and equipment
|
440,296 | |||
|
Intangible
assets
|
167,054 | |||
|
Other
assets
|
108,154 | |||
|
Loans and
financings
|
(25,638 | ) | ||
|
Trade
accounts payable
|
(79,680 | ) | ||
|
Deferred
income taxes
|
(92,637 | ) | ||
|
Notes payable
to ExxonMobil Capital N.V.
|
(175,327 | ) | ||
|
Estimated
liability for legal proceedings and labor claims (Note 14)
|
(111,608 | ) | ||
|
Estimated
liability for unrecognized tax benefits (Note 16)
|
(34,605 | ) | ||
|
Actuarial
liability
|
(31,338 | ) | ||
|
Other
liabilities
|
(41,107 | ) | ||
|
Net assets
(liabilities) acquired (assumed)
|
399,365 | |||
|
Consideration
transferred, net of cash acquired
|
711,858 | |||
|
Goodwill
|
312,493 | |||
Goodwill relating
to the Cosan CL acquisition, which is substantially based on future
profitability will be substantially deductible for tax purposes, and has been
assigned to the Fuel Distribution and Lubricants operating segment.
29
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
f. Cosan
S.A. 6.24%
On September 19,
2008, the board of directors of Cosan S.A. approved a capital increase of
US$456,084 through issuance of 55,000,000 previously unissued registered common
shares without par value in a private subscription at an issuance price of
US$8.29 each. October 22, 2008 was the deadline to exercise the right of capital
subscription, approved in the meeting of the board of directors on September 19,
2008. Since a large number of the minority shareholders did not exercise their
preemptive rights, Cosan Limited, the controlling shareholder, subscribed for
and paid up 54,993,482 common shares valued at US$456,034, and the minority
shareholders subscribed for and paid up 6,518 common shares, valued at US$50. As
a result, Cosan Limited increased its holding of company’s common shares from
171,172,252 to 226,165,734. This transaction, which generated immaterial
negative goodwill, increased Cosan Limited’s ownership percentage from 62.81% to
69.05% of the Company’s capital.
The following table
summarizes the estimated fair value of assets acquired and liabilities assumed
in the acquisition:
|
Cosan
S.A.
|
||||
| 6.24% | ||||
|
Description
|
US$
|
|||
|
Property,
plant and equipment
|
162,283 | |||
|
Intangible
assets
|
6,862 | |||
|
Other
assets
|
146,075 | |||
|
Loans and
financings
|
(83,454 | ) | ||
|
Trade
accounts payable
|
(13,215 | ) | ||
|
Deferred
income taxes
|
(5,220 | ) | ||
|
Estimated
liability for legal proceedings and labor claims
|
(34,031 | ) | ||
|
Other
liabilities
|
(54,932 | ) | ||
|
Net assets
(liabilities) acquired (assumed)
|
124,368 | |||
|
Consideration
transferred, net of cash acquired
|
124,368 | |||
|
Goodwill
|
- | |||
30
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30, 2008 (In
thousands of U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
g. Cosan S.A.
6.7%
Cosan S.A. and
Cosan announced the Share Acquisition Voluntary Public Offering (OPA) where
Cosan aimed to acquire up to 100% of the unowned common shares of Cosan S.A.
through and exchange for Class A shares depositary receipts (BDRs), for Class A
shares, issued by Cosan. Upon the conclusion of the OPA on April 18, 2008,
18,232,812 shares of Cosan were exchanged, representing an increase in its
interest in Cosan S.A. of 6.7%. With the OPA, Cosan became the holder of 62.8%
of the Cosan S.A.’s total common shares.
The following table
summarizes the estimated fair value of assets acquired and liabilities assumed
in the acquisition:
|
Cosan
S.A.
|
||||
| 6.7% | ||||
|
Description
|
US$
|
|||
|
Property,
plant and equipment
|
202,208 | |||
|
Intangible
assets
|
2,779 | |||
|
Other
assets
|
176,578 | |||
|
Loans and
financings
|
(87,065 | ) | ||
|
Other
liabilities
|
(95,657 | ) | ||
|
Net assets
(liabilities) acquired (assumed)
|
198,843 | |||
|
Purchase
price, net of cash acquired
|
- | |||
|
Acquisition
paid with equity
|
250,774 | |||
|
Goodwill
|
51,931 | |||
h.
Cosan S.A. 5.4%
At the
Extraordinary General Meeting held by Cosan S.A. on December 5, 2007, a capital
increase of US$967,198 was approved, through issue of 82,700,000 common
registered uncertified shares without par value, by means of private
subscription, at the issue price of US$11.70 each. On January 23, 2008, the
period for exercising the capital subscription rights ended. Cosan subscribed
and paid in 56,607,396 common shares in the amount of US$662,038, followed by
subscription and payment by minority shareholders of 26,092,604 common shares
equivalent to US$305,160. As a result of the subscription of shares, Cosan holds
152,939,440 common shares, increasing its proportionate interest of Cosan S.A.’s
capital from 50.8% to 56.1%.
31
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
8.
|
Acquisitions
(Continued)
|
h. Cosan
S.A. 5.4%
(continued)
The following table
summarizes the estimated fair value of assets acquired and liabilities assumed
in the acquisition:
|
Cosan
S.A.
|
||||
| 5.4% | ||||
|
Description
|
US$
|
|||
|
Property,
plant and equipment
|
135,858 | |||
|
Intangible
assets
|
2,147 | |||
|
Other
assets
|
128,905 | |||
|
Loans and
financings
|
(71,924 | ) | ||
|
Other
liabilities
|
(76,038 | ) | ||
|
Net assets
(liabilities) acquired (assumed)
|
118,948 | |||
|
Purchase
price, net of cash acquired
|
151,544 | |||
|
Goodwill
|
32,596 | |||
The following
unaudited pro forma financial information presents the pro forma results of
operations of Cosan and the acquired companies as if the acquisitions had
occurred at the beginning of the years presented. The unaudited pro forma
financial information does not purport to be indicative of the results that
would have been obtained if the acquisitions had occurred as of the beginning of
the years presented or that may be obtained in the future:
|
2010
|
2009
|
|||||||
|
Net
sales
|
8,380,069 | 6,686,752 | ||||||
|
Net (loss)
income
|
327,084 | (223,910 | ) | |||||
|
Basic and
diluted EPS (loss per share) per thousand shares (US$)
|
1.21 | (0.91 | ) | |||||
32
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30, 2008 (In
thousands of U.S. dollars, unless otherwise stated)
|
9.
|
Goodwill
and other intangible assets
|
Goodwill
The carrying
amounts of goodwill by reporting segment as of March 31, 2010 and 2009 are as
follows:
|
Fuels
|
||||||||||||||||
|
Distribution
|
||||||||||||||||
|
Sugar
and
|
Sugar
|
and
|
||||||||||||||
|
Ethanol
|
Logistics
|
Lubricants
|
||||||||||||||
|
segment
|
segment
|
segment
|
||||||||||||||
|
(S&E)
|
(Rumo)
|
(CCL)
|
Total
|
|||||||||||||
|
Balance
as of April 30, 2008
|
772,590 | - | - | 772,590 | ||||||||||||
|
Acquisitions
|
- | - | 312,493 | 312,493 | ||||||||||||
|
Total tax
benefit applied to reduce goodwill
|
(11,736 | ) | - | - | (11,736 | ) | ||||||||||
|
Effect of
currency translation
|
(185,408 | ) | - | 854 | (184,554 | ) | ||||||||||
|
Balance
as of March 31, 2009
|
575,446 | - | 313,347 | 888,793 | ||||||||||||
|
Acquisitions
|
187,430 | 27,739 | - | 215,169 | ||||||||||||
|
Sale of
Esso´s aviation business
|
- | - | (19,374 | ) | (19,374 | ) | ||||||||||
|
Addition
related to determinable and estimable contingent
consideration.
|
- | - | 26,208 | 26,208 | ||||||||||||
|
Effect of
currency translation
|
153,430 | 7,927 | 90,918 | 252,275 | ||||||||||||
|
Balance
as of March 31, 2010
|
915,306 | 35,666 | 411,099 | 1,362,071 | ||||||||||||
There are no
accumulated impairment losses.
Other
intangible assets
| As of March 31, 2010 | |||||||||||||
|
Weighted
|
|||||||||||||
|
Gross
|
average
|
Net
|
|||||||||||
|
Carrying
|
amortization
|
Accumulated
|
Carrying
|
||||||||||
|
Amount
|
period
|
amortization
|
Amount
|
||||||||||
|
Intangible
assets subject to amortization:
|
|||||||||||||
|
Favorable
operating leases
|
126,615 |
16
years
|
(46,624 | ) | 79,991 | ||||||||
|
Trademark
(“Barra”)
|
8,648 |
15
years
|
(3,652 | ) | 4,996 | ||||||||
|
Trademark
(“Esso”)
|
70,130 |
5
years
|
(18,701 | ) | 51,429 | ||||||||
|
Trademark
("União")
|
49,663 |
50
years
|
(828 | ) | 48,835 | ||||||||
|
Port
concession
|
177,977 |
27
years
|
(6,592 | ) | 171,385 | ||||||||
|
Purchase
Contract
|
87,313 |
18
years
|
(4,042 | ) | 83,271 | ||||||||
|
Customer base
– Esso
|
150,904 |
29
years
|
(6,938 | ) | 143,966 | ||||||||
|
Software
|
46,912 |
5
years
|
(28,522 | ) | 18,390 | ||||||||
|
Total
|
718,161 | (115,899 | ) | 602,263 | |||||||||
33
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30, 2008 (In
thousands of U.S. dollars, unless otherwise stated)
|
9.
|
Goodwill and other intangible
assets (Continued)
|
Other intangible
assets (Continued)
| As of March 31, 2009 | |||||||||||||
|
Weighted
|
|||||||||||||
|
Gross
|
average
|
Net
|
|||||||||||
|
Carrying
|
amortization
|
Accumulated
|
Carrying
|
||||||||||
|
Amount
|
period
|
amortization
|
Amount
|
||||||||||
|
Intangible
assets subject to amortization:
|
|||||||||||||
|
Favorable
operating leases
|
97,401 |
16
years
|
(30,036 | ) | 67,365 | ||||||||
|
Trademark
(“Barra”)
|
7,104 |
15
years
|
(2,426 | ) | 4,678 | ||||||||
|
Trademark
(“Esso”)
|
53,949 |
5
years
|
(3,597 | ) | 50,352 | ||||||||
|
Customer base
- Esso
|
116,084 |
29
years
|
(7,738 | ) | 108,346 | ||||||||
|
Software
|
27,526 |
5
years
|
(15,125 | ) | 12,401 | ||||||||
|
Total
|
302,064 | (59,922 | ) | 243,142 | |||||||||
The intangible
assets identified in each acquisition were valued based on the benefit that each
acquired company had in contracts with third parties with market
benefits/discounts. The intangible assets are amortized on the straight-line
method based on the contract periods.
No significant
residual value is estimated for these intangible assets. The following table
represents the total estimated amortization of intangible assets for the five
succeeding fiscal years:
|
2011
|
49,174 | |||
|
2012
|
49,800 | |||
|
2013
|
39,792 | |||
|
2014
|
34,835 | |||
|
2015
|
24,636 | |||
|
Thereafter
|
405,026 | |||
| 602,263 |
34
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
10.
|
Accounts
receivable from Federal Government
|
The subsidiary
Cosan Açúcar e Álcool has several indemnification suits filed against the
Federal Government. The suits relate to product prices that did not conform to
the reality of the market, which were mandatorily established at the time the
sector was under the Government‘s control.
In connection with
one of these suits, a final and unappealable decision in the amount of
US$149,121 was rendered in September 2006 in favor of Usina de Barra. This has
been recorded as a gain in the statement of operations in 2007. Since the
recorded amount is substantially composed of interest and monetary restatement,
it was recorded in financial income and in a non-current receivable on the
balance sheet. In connection with the settlement process, the form of payment
continues to be negotiated with the government.
At March 31, 2010,
the receivable and corresponding lawyers’ fees totaled US$187,385 and US$22,486
(US$139,700 and US$16,764 at March 31, 2009), respectively.
|
11.
|
Taxes
payable
|
Cosan Ltd. is
incorporated in Bermuda which has no income taxes. The following relates to
Brazilian taxes of Cosan S.A. and its subsidiaries.
Taxes payable are
summarized as follows:
|
March
31,
|
March
31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Tax Recovery
Program – Federal REFIS (1)
|
- | 71,591 | ||||||
|
Special Tax
Payment Program – PAES (1)
|
230 | 28,472 | ||||||
|
Tax Recovery
from Brazilian Law No 11.941/09 and MP 470/09
|
373,650 | - | ||||||
|
Income Tax
and Social Contribution
|
50,471 | 71,747 | ||||||
|
Others
|
78,657 | 48,708 | ||||||
| 503,008 | 220,518 | |||||||
|
Current
liabilities
|
(121,203 | ) | (69,042 | ) | ||||
|
Long-term
liabilities
|
381,805 | 151,476 | ||||||
|
(1)
|
These tax recovery programs
have been reassessed and transferred to the Tax Recovery from Brazilian
Law No 11.941/09 and MP 470/09, except for the recovery
program related to PAES – salário
educação.
|
35
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
11.
|
Taxes payable
(Continued)
|
On May 27, 2009 and
October 13, 2009, Law 11.941 and MP 470 were approved by the Brazilian
government creating a tax recovery program, permitting the taxpayer to settle
its federal tax debts, previous recovery programs, and other federal taxes under
court discussions with discounts on previously charged penalties and interest
and in installments.
Additionally, it
was permitted for the taxpayer to offset a portion of the penalties and interest
due with its balance of income tax loss carry forwards. MP470 also allowed
taxpayers to use tax losses to offset the principal balance related to IPI taxes
(credit premium, Note 15).
During the year,
Cosan S.A. and subsidiaries joined the tax recovery program and the following
effects were recorded:
|
2010
|
||||
|
Tax payable and related
estimated liability for legal proceedings before joining the
tax recovery program Law 11.941 and MP 470
|
898,802 | |||
|
Legal
reductions
|
(348,604 | ) | ||
|
Net
balance overdue on tax recovery program Law 11.941 and MP
470
|
550,198 | |||
|
Tax payable
and related estimated liability for legal proceedings
recorded
|
(701,985 | ) | ||
|
before
joining the tax recovery program Law 11.941 and MP 470
|
||||
|
Current
translation adjustment
|
6,930 | |||
|
Gain
on tax recovery program
|
(144,857 | ) | ||
|
Net
balance overdue on tax recovery program Law 11.941 and MP
470
|
550,198 | |||
|
Amortization
of Judicial Deposits
|
(56,620 | ) | ||
|
Use of income
tax loss carry forward
|
(114,488 | ) | ||
|
Installments
paid
|
(16,444 | ) | ||
|
Interest
|
11,004 | |||
|
Tax
Recovery from Brazilian Law No 11.941/09 and MP 470/09 as of
March
31, 2010
|
373,650 | |||
36
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
12.
|
Long-term
debt
|
Long-term debt is
summarized as follows:
|
Average
|
|||||||||||||
|
annual
|
March
31,
|
March
31,
|
|||||||||||
|
Index
|
interest
rate
|
2010
|
2009
|
||||||||||
|
Resolution
No. 2471 (PESA)
|
IGP-M
|
4.0 | % | 297,243 | 215,631 | ||||||||
|
Senior notes
due 2009
|
US
Dollar
|
9.0 | % | - | 37,386 | ||||||||
|
Senior notes
due 2014
|
US
Dollar
|
9.5 | % | 354,433 | - | ||||||||
|
Senior notes
due 2017
|
US
Dollar
|
7.0 | % | 405,258 | 405,389 | ||||||||
|
IFC
|
US
Dollar
|
7.4 | % | - | 49,362 | ||||||||
|
Perpetual
notes
|
US
Dollar
|
8.3 | % | 455,820 | 456,463 | ||||||||
|
BNDES
|
TJLP
|
2.6 | % | 520,068 | 99,561 | ||||||||
|
Floating rate
notes
|
Libor
|
2.8 | % | - | 151,207 | ||||||||
|
Promissory
notes
|
DI
|
3.0 | % | - | 501,888 | ||||||||
|
Export credit
notes
|
DI
|
2.4 | % | 212,660 | - | ||||||||
|
Credit
Notes
|
DI
|
6.2 | % | 102,656 | - | ||||||||
|
Export
Pre-payment
|
US
Dollar
|
5.2 | % | 547,230 | - | ||||||||
|
Others
|
Various
|
Various
|
421,360 | 115,872 | |||||||||
| 3,316,728 | 2,032,759 | ||||||||||||
|
Current
liability
|
(471,061 | ) | (781,664 | ) | |||||||||
|
Long-term
debt
|
2,845,667 | 1,251,095 | |||||||||||
Long-term debt has
the following scheduled maturities:
|
2012
|
339,803 | |||
|
2013
|
416,660 | |||
|
2014
|
128,182 | |||
|
2015
|
473,201 | |||
|
2016
|
59,509 | |||
|
2017
|
459,584 | |||
|
2018
|
57,385 | |||
|
2019 and
thereafter
|
911,343 | |||
| 2,845,667 |
37
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
12.
|
Long-term debt
(Continued)
|
Resolution
No. 2471 - Special Agricultural Financing Program (Programa Especial de
Saneamento de Ativos), or PESA
To extend the
repayment period of debts incurred by Brazilian agricultural producers, the
Brazilian government passed Law 9.138 followed by Central Bank Resolution 2,471,
which, together, formed the PESA program. PESA offered certain agricultural
producers with certain types of debt the opportunity to acquire Brazilian
treasury bills ( “CTNs”) in an effort to restructure their agricultural debt.
The face value of the Brazilian treasury bills was the equivalent of the value
of the restructured debt and was for a term of 20 years.
The acquisition
price was calculated by the present value, discounted at a rate of 12% per year
or at the equivalent of 10.4% of its face value. The CTNs were deposited as a
guarantee with a financial institution and cannot be renegotiated until the
outstanding balance is paid in full. The outstanding balance associated with the
principal is adjusted in accordance with the IGP-M until the expiration of the
restructuring term, which is also 20 years, at which point the debt will be
discharged in exchange for the CTNs. Because the CTNs will have the same face
value as the outstanding balance at the end of the term, it will not be
necessary to incur additional debt to pay PESA debt.
On July 31, 2003,
the Central Bank issued Resolution 3,114, authorizing the reduction of up to
five percentage points of PESA related interest rates, effectively lowering the
above-mentioned rates to 3%, 4% and 5%, respectively. The CTNs held by Cosan as
of March 31, 2010 and March 31, 2009 amounted to US$133,039 and US$91,717,
respectively, and considered as restricted cash and are classified as other
non-current assets.
Senior
notes due 2017
On January 26,
2007, the wholly-owned subsidiary Cosan Finance Limited issued US$400,000 of
senior notes in the international capital markets. These senior notes, listed on
the Luxembourg Stock Exchange, mature in November 2017 and bear interest at a
rate of 7% per annum, payable semi-annually. The senior notes are guaranteed by
Cosan, and its subsidiary, Cosan Açúcar e Álcool.
38
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
12.
|
Long-term debt
(Continued)
|
Senior
notes due 2014
On August 4, 2009,
the indirect subsidiary CCL Finance Limited issued US$ 350,000 of senior notes
in the international capital markets. These senior notes, listed on the
Luxembourg Stock Exchange, mature in August 2014 and bear interest at a rate of
9.5% per annum, payable semi-annually in February and August of each year, from
February of 2010.
Perpetual
notes
On January 24 and
February 10, 2006, Cosan issued perpetual notes which are listed on the
Luxembourg Stock Exchange - EURO MTF. These notes bear interest at a rate of
8.25% per year, payable quarterly on May 15, August 15, November 15 and February
15 of each year, beginning May 15, 2006.
These notes may, at
the discretion of Cosan, be redeemed on any interest payment date subsequent to
February 15, 2011. The notes are guaranteed by Cosan and by Cosan Açúcar e
Álcool.
Promissory
Notes
On November 17,
2008, the Company issued one series of 44 registered promissory notes for
US$520,024. The notes which are due in one year, will bear interest, due at
maturity, at the average rates of DI - Interbank Deposits plus 3%.
On November 12,
2009, the Company fully paid this debt. At this date, the amount paid totaled
US$703,801.
Export
Pre-payment Notes
During the third
quarter of 2009, the Company obtained funds from export prepayment notes at the
total amount of US$530,000. The export pre-payment notes are due from 2012
through 2014, and bear interest of Libor plus 5.2%
BNDES
Refers to the
financing of cogeneration projects, as well as the financing of Jataí and
Caarapó greenfields (sugar and ethanol mills).
39
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
12.
|
Long-term debt
(Continued)
|
Credit
Notes
The Company
executed several credit note agreements with several financial institutions
during 2010 which will be paid through export operations during 2012. The credit
notes bear interest at rates between 2.1% and 6.2% per annum, payable
semi-annually.
Covenants
Cosan and its
subsidiaries are subject to certain restrictive covenants related to their
indebtedness.
At March 31, 2010,
Cosan was in compliance with its debt covenants.
|
13.
|
Related
parties
|
Assets and
liabilities with related parties are summarized as follows:
|
Assets
|
||||||||
|
March
31,
|
March
31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Cosan
Alimentos S.A.
|
- | 13,123 | ||||||
|
Rezende
Barbosa S.A. Administração e Participações
|
48,889 | - | ||||||
|
Vertical UK
LLP
|
- | 11,597 | ||||||
|
Others
|
10,780 | - | ||||||
| 59,669 | 24,720 | |||||||
|
Current
(*)
|
(13,958 | ) | (24,720 | ) | ||||
|
Noncurrent
(*)
|
45,711 | - | ||||||
|
Liabilities
|
||||||||
|
March
31,
|
March
31,
|
|||||||
| 2010 | 2009 | |||||||
|
Logispot
Armazéns Gerais S.A.
|
6,313 | - | ||||||
|
Others
|
1,781 | 1,926 | ||||||
| - | ||||||||
|
Current
(*)
|
8,094 | 1,926- | ||||||
(*)
included in other current and noncurrent assets or liabilities
captions
The amount
receivable from Cosan Alimentos S.A. referred to an intercompany loan not
subject to interest.
40
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
13.
|
Related parties
(Continued)
|
A receivable of US$
48,889 with Rezende Barbosa S.A. Administração e Participações related to
credits assumed by Rezende Barbosa, in connection with the acquisition of Cosan
Alimentos and intercompany loans.
The amount
receivable from the affiliate Vertical UK LLP, located in British Virgin
Islands, refers to ethanol trading, whith an average maturity date of 30
days.
The payable to
Logispot is related to the remaining payment in connection with the interest
acquired. (Note 8)
Cosan conducts some
of its operations through various joint ventures and other partnership forms
which are principally accounted for using the equity method. The statement of
operations includes the following amounts resulting from transactions with
related parties:
|
2010
|
2009
|
2008
|
||||||||||
|
Transactions
involving assets:
|
||||||||||||
|
Cash received
due to the sale of finished products and assets and services held,
net of payments
|
(159,734 | ) | (242,320 | ) | (36,773 | ) | ||||||
|
Sale of
finished products and services
|
137,147 | 122,381 | 46,410 | |||||||||
|
Sale of real
estate (land) (Note 21)
|
- | 13,967 | - | |||||||||
|
Sale of
interest in a subsidiary (Note 21)
|
- | 123,649 | - | |||||||||
|
Added through
acquisition
|
39,240 | |||||||||||
|
Financial
Income
|
9,624 | - | - | |||||||||
|
Transactions
involving liabilities:
|
||||||||||||
|
Payment of
financial resources, net of funding
|
2,698 | - | - | |||||||||
|
Financial
income
|
(172,721 | ) | 178,455 | - | ||||||||
|
Other
|
- | (2,700 | ) | (395 | ) | |||||||
The purchase and
sale of products are carried out at arm’s length and unrealized profit or losses
with consolidated companies have been eliminated. Those operations are also
carried out at prices and under conditions similar to those existing in the
market.
41
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
13.
|
Related parties
(Continued)
|
At March 31, 2010,
Cosan S.A. and its subsidiaries were lessees of approximately 68,000 hectares
(unaudited) (35,000 hectares (unaudited) in 2009) of affiliated companies land
and its related party Radar Propriedades Agrícolas S.A., which is controlled by
another shareholder. These operations are carried out under conditions and
prices similar to those prevailing in the market, calculated based on sugarcane
tons per hectare, valued in accordance with the price established by CONSECANA
(São Paulo State Council of Sugarcane, Sugar and Ethanol
Producers).
|
14.
|
Pension
and other postretirement
benefits
|
a)
Description of the plans
The Company’s
subsidiary Cosan CL has a noncontributory defined benefit pension plan covering
substantially all of its employees upon their retirement.
b)
Changes in plan assets and plan liabilities
Cosan CL performs
the actuarial valuation of its defined benefit plan using its March 31 year-end
as the measurement date. An actuarial valuation as of the acquisition date was
also prepared. Information with respect to Cosan CL’s defined benefit plan is as
follows:
|
March
31,
|
March
31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Change
in benefit obligation
|
||||||||
|
Projected
benefit obligation
|
156,505 | 153,171 | ||||||
|
Service
cost
|
2,935 | 578 | ||||||
|
Interest cost
on pension benefit obligation
|
16,291 | 3,367 | ||||||
|
Benefits
payments
|
(10,173 | ) | (1,710 | ) | ||||
|
Actuarial
(gain) losses
|
(28,817 | ) | (102 | ) | ||||
|
Effect of
exchange rate changes
|
46,041 | 1,201 | ||||||
|
Projected
benefit obligation at end of year
|
182,782 | 156,505 | ||||||
|
March
31,
|
March
31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Change
in plan assets
|
||||||||
|
Fair value of
plan assets at date of acquisition
|
128,382 | 121,518 | ||||||
|
Actual return
on plan assets
|
31,638 | 6,218 | ||||||
|
Employer
contributions
|
4,503 | 1,371 | ||||||
|
Benefits
payments
|
(9,135
|
) |
(1,710
|
) | ||||
|
Effect of
exchange rate changes
|
39,841
|
985
|
||||||
|
Fair
value of plan assets at end of year
|
195,229
|
128,382
|
||||||
42
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
14.
|
Pension and other
postretirement benefits
(Continued)
|
b)
Changes in plan assets and plan liabilities (Continued)
|
March
31,
|
March
31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Accrued
pension cost asset (liability)
|
||||||||
|
Funded
status, excess projected benefit obligation over plan
assets
|
12,447 | (28,123 | ) | |||||
|
Accrued
pension cost – Other non-current assets
|
12,447 | - | ||||||
|
Accrued
pension cost – Other current liabilities
|
- | 7,211 | ||||||
|
Accrued
pension cost – Other non-current liabilities
|
- | (20,912 | ) | |||||
c)
Amounts recognized in accumulated other comprehensive income (loss)
Amounts recognized
in accumulated other comprehensive income (loss) consist of:
|
Pension
benefits
|
||||||||
|
March
31,
|
March
31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Unrecognized
gains
|
50,202 | 3,553 | ||||||
|
Deferred
income taxes
|
(17,068 | ) | (1,208 | ) | ||||
|
Effect of
currency translation
|
(2,934 | ) | 19 | |||||
| 30,200 | 2,364 | |||||||
d)
Net periodic benefit cost
Net periodic
pension cost includes the following components for the period since the date of
acquisition:
|
March
31,
2010
|
March
31,
2009
|
|||||||
|
Service
cost
|
2,935 | 578 | ||||||
|
Interest cost
on projected benefit obligation
|
16,291 | 3,367 | ||||||
|
Expected
return on plan assets:
|
(15,558 | ) | (2,767 | ) | ||||
|
Net
periodic pension cost
|
3,668 | 1,178 | ||||||
43
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
The unrecognized
gains that will be amortized from accumulated other comprehensive income (loss)
into net periodic benefit cost during the next year is U$3,144 by Cosan S.A. and
US$1,958 by Cosan.
|
14.
|
Pension and other
postretirement benefits
(Continued)
|
e) Actuarial
assumptions
Assumptions used
for the actuarial calculations were as follows:
Assumptions used to
determine benefit obligations:
|
March
31,
|
March
31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Discount
rate
|
11.08 | % | 9.20 | % | ||||
|
Rate of
compensation increase
|
6.07 | % | 5.56 | % | ||||
Assumptions used to
determine net periodic benefit cost:
|
March
31,
2010
|
March
31,
2009
|
|||||||
|
Discount
rate
|
11.08 | % | 9.20 | % | ||||
|
Expected
long-term rates of return on plan assets
|
10.48 | % | 10.59 | % | ||||
|
Rate of
compensation increase
|
6.07 | % | 5.56 | % | ||||
The discount rate
is determined using bond portfolios with an average maturity approximating that
of the liabilities or spot yield curves, both of which are constructed using
high-quality, local-currency-denominated bonds. The expected long-term rate of
return is based on the portfolio as a whole and not on the sum of the returns on
individual asset categories.
The accumulated
benefit obligation is as follows:
|
Accumulated
benefit obligation
|
March
31,
2010
|
March
31,
2009
|
||||||
|
Actuarial
present value of:
|
||||||||
|
Vested
benefit obligation
|
142,967 | 121,362 | ||||||
|
Non-vested
benefit obligation
|
20,651 | 17,820 | ||||||
|
Total
accumulated benefit obligation
|
163,618 | 139,182 | ||||||
The asset
allocations of the Company’s plan assets as of the measurement dates were as
follows:
44
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
| Asset allocation (%) | ||||||||||||
|
March
31,
|
March
31,
|
|||||||||||
|
Asset
category
|
2010
|
2009
|
Target
|
|||||||||
|
Equity
securities
|
25 | 25 | 25 | |||||||||
|
Debt
securities
|
75 | 75 | 75 | |||||||||
|
Total
|
100 | 100 | 100 | |||||||||
|
14.
|
Pension and other
postretirement benefits (Continued)
|
f)
Cash flows
The expected
contribution to the Plan for 2010 of US$4,287, was estimated based on the actual
plan cost as of the valuation date. The expected benefit payments for 2010,
amounting to US$10,013, were estimated based on the projected benefit obligation
as of the valuation date.
The following
benefit payments, which reflect expected future service, as appropriate, are
expected to be paid:
|
2010
|
10,013
|
|
2011
|
10,582
|
|
2012
|
11,363
|
|
2013
|
12,172
|
|
2014
|
12,892
|
|
2015 to
2019
|
85,196
|
g)
Investment strategy and policies:
The pension plan
management implemented an asset investment policy to manage the investments and
risk concentration of the Plan.
The investment
policy establishes principles and guidance that must be followed in investing
the resources of the plan. The Company’s investment goals are to maximize
returns subject to specific risk management policies, with a philosophy of
investment based on a long term perspective.
Its risk management
policies permit investments only in fixed income and equity
securities.
The Investment
Committee is responsible by the tactical decisions about resource allocations
and modifications of the investment policy.
45
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
14.
|
Pension and other
postretirement benefits
(Continued)
|
The investment in
equity securities is targeted to be approximately of 25% of the investment
portfolio, with the remaining amount invested in fixed income securities and
funds. This target could change depending on the market conditions. The limits
of allocation are determined based on the characteristics of the population of
participants of the pension plan and actuarial target.
The table below
demonstrates how the resources can be allocated:
|
Minimum
|
Maximum
|
Target
|
||||||||||
|
Asset
category
|
||||||||||||
|
Fixed
Income
|
30 | % | 100 | % | 75 | % | ||||||
|
Equity
securities
|
- | 70 | % | 25 | % | |||||||
The risk
concentration is mitigated through procedures which permit identifying,
evaluating, controlling and monitoring several risks which the plan resources
are exposed to, among them market, credit, liquidity, operating, legal and
systemic.
h)
Fair value of plan assets by major categories
The fair value of
investments as of March 31, 2010 is set forth below:
|
March
31,
2010
|
||||
|
Asset
category
|
||||
|
Fixed
income
|
146,422 | |||
|
Equity
securities
|
48,807 | |||
|
Total
|
195,229 | |||
Fair
value measurement on plan assets at March 31, 2010
|
Level 1 /
Total
|
||||
|
Asset
category
|
||||
|
Fixed
income
|
146,422 | |||
|
Equity
securities
|
48,807 | |||
|
Total
|
195,229 | |||
46
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
15.
|
Estimated
liability for legal proceedings and
commitments
|
|
2010
|
2009
|
|||||||
|
Tax
contingencies
|
173,924 | 430,342 | ||||||
|
Civil and
labor contingencies
|
120,681 | 67,306 | ||||||
| 294,605 | 497,648 | |||||||
Cosan and its
subsidiaries are parties in various ongoing labor claims, civil and tax
proceedings arising in the normal course of its business. Respective provisions
for contingencies were recorded considering those cases in which the likelihood
of loss has been rated as probable. Management believes resolution of these
disputes will have no effect significantly different than the estimated amounts
accrued.
Judicial deposits
recorded by Cosan under non-current assets, amounting to US$94,083 at March 31,
2010 (US$73,975 at March 31, 2009) have been made for certain of these suits.
Judicial deposits are restricted assets of Cosan placed on deposit with the
court and held in judicial escrow pending legal resolution of the related legal
proceedings. The company used judicial deposits to pay for a portion of the tax
recovery program as discussed in Note 11.
The major tax
contingencies as of March 31, 2010 and 2009 are described as
follows:
|
2010
|
2009
|
|||||||
|
Credit
premium – IPI (i)
|
- | 116,256 | ||||||
|
PIS and
Cofins (ii)
|
11,910 | 62,556 | ||||||
|
IPI credits
(i)
|
- | 40,049 | ||||||
|
Contribution
to IAA (i)
|
- | 36,672 | ||||||
|
IPI – Federal
VAT (i)
|
4,692 | 23,626 | ||||||
|
ICMS
credits
|
33,824 | 19,966 | ||||||
|
Compensation
with Finsocial (iii)
|
97,114 | 70,693 | ||||||
|
Other
|
26,384 | 60,524 | ||||||
| 173,924 | 430,342 | |||||||
47
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
15.
|
Estimated
liability for legal proceedings and commitments (Continued)
|
|
(i)
|
The Company
and its subsidiaries opted to settle tax related claims in installments as
provided by Brazilian Law No 11.941/09 and in MP 470/09. The Company and
its subsidiaries used accumulated tax losses to pay the related fines and
interest. Consequently
there was a
full reduction of the claims related to IPI tax credit, as well as the
installment payment of other federal taxes, that were recorded as Taxes
Payable (note 11).
|
|
(ii)
|
On May 27,
2009, the 1st and 3rd paragraphs of Brazilian Law No 9718/98 that
regulated the collection of PIS and Cofins (federal tax contributions) on
exchange variation and other financial income was revoked by Law No
11941/09. The Company evaluated its ongoing judicial demands related to
the legal obligations not paid related to the increase in the calculation
basis of PIS and Cofins and reversed the related provision at the amount
of US$30,213.
|
|
(iii)
|
From June to
December of 1994, the subsidiary Cosan CL used tax credits on COFINS taxes
based on a favorable court ruling and compensated with other federal
taxes. During 2008 the federal tax authorities in Brazil issued an
assessment invalidating such compensation and therefore a provision
related to this matter was
recorded.
|
The detail of the
movement in the estimated liability for legal proceedings is as
follows:
|
Balance
at April 30, 2008
|
494,098 | |||
|
Provision
|
37,731 | |||
|
Business
acquisition
|
111,608 | |||
|
Settlements
|
(12,097 | ) | ||
|
Foreign
currency translation
|
(133,692 | ) | ||
|
Balance
at March 31, 2009
|
497,648 | |||
|
Provision
|
47,732 | |||
|
Business
acquisition (see Note 8)
|
14,756 | |||
|
Settlements
|
(409,576 | ) | ||
|
Foreign
currency translation
|
144,404 | |||
|
Balance
at March 31, 2010
|
294,605 |
48
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30, 2008 (In
thousands of U.S. dollars, unless otherwise stated)
|
15.
|
Estimated
liability for legal proceedings and commitments (Continued)
|
In addition to the
aforementioned claims, Cosan and its subsidiaries are involved in other
contingent liabilities relating to tax, civil and labor claims and environmental
matters, which have not been recorded, considering their current stage and the
likelihood of unfavorable outcomes rated as possible. These claims are broken
down as follows:
|
March
31,
|
March
31,
|
|||||||
|
2010
|
2009
|
|||||||
|
ICMS – State
VAT
|
180,988 | 77,052 | ||||||
|
Withholding
Income Tax
|
102,652 | 69,730 | ||||||
|
IAA - Sugar
and Ethanol Institute
|
1,428 | 31,610 | ||||||
|
IPI - Federal
Value-added tax
|
246,190 | 100,722 | ||||||
|
INSS
|
2,280 | 795 | ||||||
|
PIS and
COFINS
|
80,604 | 15,529 | ||||||
|
Civil and
labor
|
275,403 | 94,599 | ||||||
|
Other
|
66,134 | 34,851 | ||||||
| 955,679 | 424,888 | |||||||
The provisions for
tax, civil and labor contingencies are included in the statement of operations
as follows:
|
2010
|
2009
|
2008
|
||||||||||
|
Financial
expenses
|
23,412 | 26,541 | 20,925 | |||||||||
|
Other income
(expenses)
|
16,832 | 11,190 | 4,995 | |||||||||
|
Income
taxes
|
- | - | 258 | |||||||||
| 40,244 | 37,731 | 26,178 | ||||||||||
49
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
15.
|
Estimated
liability for legal proceedings and commitments (Continued)
|
Commitments
Sales
Considering that
Cosan operates mainly in the commodities market, its sales are substantially
made at prices applicable at sales date, and therefore, there are no outstanding
orders with amounts involved. However, Cosan has several agreements in the sugar
market in which there are commitments of sales involving volumes of these
products in future harvest periods.
The commitments to
sell sugar by harvest period are as follows (unaudited):
| (In tons) | ||||||||
|
Harvest
period
|
2010
|
2009
|
||||||
|
2010
|
- | 2,428,000 | ||||||
|
2011
|
2,005,434 | 1,828,000 | ||||||
|
2012
|
1,828,134 | 1,828,000 | ||||||
|
Total
|
3,833,568 | 6,084,000 | ||||||
Purchase
Cosan has entered
into several commitments to purchase sugarcane from third parties in order to
guarantee part of its production for the next harvest periods. The amount of
sugarcane to be purchased was calculated based on an estimation of the sugarcane
to be harvested in each geographic area. The amount to be paid by Cosan will be
determined for each harvest period at the end of such harvest period according
to price of the sugarcane published by CONSECANA.
50
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
15.
|
Estimated
liability for legal proceedings and commitments (Continued)
|
The purchase
commitments by harvest period as of March 31, 2010 and 2009 are as follows
(unaudited):
|
Harvest
period
|
2010
|
2009
|
||||||
|
2010
|
- | 18,294,022 | ||||||
|
2011
|
27,029,473 | 15,597,478 | ||||||
|
2012
|
23,600,912 | 13,667,154 | ||||||
|
2013
|
20,112,639 | 9,754,713 | ||||||
|
2014
|
16,345,120 | 5,701,801 | ||||||
|
2015
|
13,667,148 | 3,198,591 | ||||||
|
2016 and
thereafter
|
120,129,217 | 5,030,758 | ||||||
|
Total
|
220,884,509 | 71,244,517 | ||||||
As of March 31,
2010, Cosan had a normal capacity to mill 60,000 thousand tons (unaudited) of
sugarcane during each harvest period.
In addition, the
Company entered into contracts to purchase industrial equipment intended for
maintenance and expansion of the mills, and to meet the demand of the electric
energy co-generation project, in the total amount of US$185,739 at March 31,
2010 (US$309,602 at March 31, 2009) (unaudited information).
Additionally, the
Company through its subsidiary Rumo Logistica S.A. entered into a commitment to
purchase railcars, locomotives and invest in rail track improvements aimed at
the expansion of the logistics business, as follows:
|
Year
ended
|
2010
|
|||
|
2011
|
366,467 | |||
|
2012
|
71,248 | |||
|
2013
|
53,162 | |||
|
Total
|
490,877 | |||
Leases
Cosan also has
noncancelable operating leases in Brazil, primarily related to seaport and lands
for the plantation of sugarcane, which expire up to the next 20
years.
51
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
15.
|
Estimated
liability for legal proceedings and commitments (Continued)
|
Minimum rent
payments under operating leases are recognized on a straight-line basis over the
term of the lease. Rental expense for operating leases during 2010, 2009
and 2008 consisted of the following:
|
2010
|
2009
|
2008
|
||||||||||
|
Minimum
rentals
|
61,062 | 46,233 | 29,767 | |||||||||
|
Contingent
rentals
|
60,545 | 44,498 | 65,990 | |||||||||
|
Rental
expense
|
121,607 | 90,731 | 95,757 | |||||||||
Future minimum
lease payments under noncancelable operating leases (with initial or all
remaining lease terms in excess of one year) as of March 31, 2010
are:
|
2010
|
||||
|
Year ending
March 31:
|
||||
|
2011
|
73,757 | |||
|
2012
|
66,220 | |||
|
2013
|
65,806 | |||
|
2014
|
66,061 | |||
|
2015
|
65,935 | |||
|
Thereafter
|
760,529 | |||
|
Total minimum
lease payments
|
1,098,308 | |||
|
16.
|
Financial
income and expenses, net
|
|
2010
|
2009
|
2008
|
||||||||||
|
Financial
expenses
|
||||||||||||
|
Interest
|
(211,891 | ) | (142,434 | ) | (149,138 | ) | ||||||
|
Monetary
variation – losses
|
(82,360 | ) | (29,978 | ) | (36,844 | ) | ||||||
|
CPMF expenses
(1)
|
- | - | (10,376 | ) | ||||||||
|
Bank
charges
|
(422 | ) | (935 | ) | (641 | ) | ||||||
|
Interest and
fees paid on advanced payment of Senior Notes
2009
|
(275 | ) | - | (16,513 | ) | |||||||
| (294,948 | ) | (173,347 | ) | (213,512 | ) | |||||||
|
Financial
income
|
||||||||||||
|
Interest
|
85,523 | 50,865 | 90,453 | |||||||||
|
Monetary
variation – Gains
|
6,249 | 4,115 | 17,815 | |||||||||
|
Discounts
obtained
|
609 | 171 | (105 | ) | ||||||||
|
Other
income
|
- | - | - | |||||||||
| 92,380 | 55,151 | 108,163 | ||||||||||
|
Sub
total
|
(202,566 | ) | (118,197 | ) | (105,349 | ) | ||||||
|
Foreign
exchange variation, net
|
255,170 | (275,528 | ) | 172,863 | ||||||||
|
Gain on
derivatives, net
|
151,076 | 22,918 | 49,253 | |||||||||
|
Financial
(Expense) / Income, net
|
203,680 | (370,806 | ) | 116,767 |
(1) Tax on Financial
Transactions – CPMF
52
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
17.
|
Income
taxes
|
Cosan is
incorporated in Bermuda which has no income taxes. The following relates to
Brazilian income taxes of Cosan S.A. and its subsidiaries.
Income tax benefit
(expense) attributable to income from continuing operations consists
of:
|
2010
|
2009
|
2008
|
||||||||||
|
Income taxes
benefit (expense):
|
||||||||||||
|
Current
|
(41,940 | ) | (638 | ) | 21,226 | |||||||
|
Deferred
|
(142,841 | ) | 145,328 | (1,416 | ) | |||||||
| (184,781 | ) | 144,690 | 19,810 | |||||||||
Income taxes
differed from the amounts computed by applying the income tax rate of 25% and
social contribution tax rate of 9% to income before income taxes due to the
following:
|
2010
|
2009
|
2008
|
||||||||||
|
Income (loss)
before income taxes
|
700,931 | (421,901 | ) | (25,012 | ) | |||||||
|
Income tax
benefit (expense) at statutory rate — 34%
|
(238,317 | ) | 143,446 | 8,504 | ||||||||
|
Increase
(reduction) in income taxes resulting from:
|
||||||||||||
|
Nontaxable
income of the Company
|
5,441 | (1,344 | ) | 11,913 | ||||||||
|
Equity in
earnings of affiliates not subject to taxation
|
(3,486 | ) | 2,083 | (81 | ) | |||||||
|
Tax effect on
tax recovery program Law 11.941/09 and
|
||||||||||||
|
MP
470/09
|
31,635 | - | - | |||||||||
|
Tax loss
carryforwards Law MP 470/09´s write-off
|
20,543 | - | - | |||||||||
|
Nondeductible
goodwill amortization
|
- | (2,621 | ) | (1,952 | ) | |||||||
|
Nondeductible
donations, contributions and others
|
(597 | ) | 3,126 | 1,426 | ||||||||
|
Income tax
(expense) benefit
|
(184,781 | ) | 144,690 | 19,810 | ||||||||
53
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
17.
|
Income taxes
(Continued)
|
The tax effects of
temporary differences that give rise to significant portions of the deferred tax
assets and deferred tax liabilities at March 31, 2010 and 2009 are presented
below:
|
2010
|
2009
|
|||||||
|
Deferred
tax assets:
|
||||||||
|
Net operating
loss carryforwards
|
166,555 | 123,533 | ||||||
|
Estimated
liability for legal proceedings and labor claims
|
120,857 | 137,965 | ||||||
|
Sale-leaseback
(see Note 21)
|
23,036 | 18,651 | ||||||
|
Other
temporary differences
|
14,458 | 63,906 | ||||||
|
Total gross
deferred tax assets
|
324,906 | 344,055 | ||||||
|
Deferred
tax liabilities:
|
||||||||
|
Deferred tax liabilities on
assigned value of the net assets and temporary
differences:
|
||||||||
|
Property,
plant and equipment
|
(255,011 | ) | (200,729 | ) | ||||
|
Intangibles
|
(197,942 | ) | (77,843 | ) | ||||
|
Exchange
variation
|
(103,003 | ) | - | |||||
|
Tax benefit
on deductible statutory goodwill amortization
|
(130,319 | ) | (50,966 | ) | ||||
|
Other
temporary differences on business acquisition
|
(5,973 | ) | (17,135 | ) | ||||
|
Other
temporary differences
|
(41,490 | ) | (29,669 | ) | ||||
|
Total gross
deferred tax liabilities
|
(733,738 | ) | (376,342 | ) | ||||
|
Net deferred
tax assets/ (liabilities)
|
(408,832 | ) | (32,287 | ) | ||||
|
Recorded as
other current assets / (liabilities)
|
- | 8,090 | ||||||
|
Recorded as
non-current deferred income taxes liabilities
|
(408,832 | ) | (40,377 | ) | ||||
In assessing the valuation allowance
of deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred tax
liabilities and projected future taxable income in making this assessment. There
is no expiration term for the net operating loss carry forwards. Based upon the
level of historical taxable income and projections for future taxable income
over the periods in which the deferred tax assets are deductible, management
believes it is more likely than not that Cosan will realize the benefits of
these deductible differences at March 31, 2010, as well as the net operating
loss carry forwards. The amount of the deferred tax assets considered
realizable, however, could be reduced in the near term if estimates of
future taxable income during the carry forward period are
reduced.
54
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30, 2008 (In
thousands of U.S. dollars, unless otherwise stated)
|
17.
|
Income taxes
(Continued)
|
As of March 31,
2010, Cosan and its subsidiaries have consolidated net operating loss carry
forwards for income tax and social contribution tax losses of US$488,176, and
US$495,189, respectively. Income tax losses carry forwards and social
contribution tax losses may be offset against a maximum of 30% of annual taxable
income earned from 1995 forward, with no statutory limitation
period.
Cosan accounts for
unrecognized tax benefits in accordance with ASC 740, “Accounting for Uncertainly in Income
Taxes”. A reconciliation of the beginning and ending amount of
unrecognized tax benefits recorded as noncurrent taxes payable, is as
follows:
A reconciliation of
the beginning and ending amount of unrecognized tax benefits is as
follows:
|
Balance at
May 1, 2008
|
23,656 | |||
|
Increase
through business acquisition
|
34,605 | |||
|
Accrued
interest on unrecognized tax benefit
|
1,534 | |||
|
Settlements
|
(48 | ) | ||
|
Effect of
foreign currency translation
|
(5,752 | ) | ||
|
Balance at
March 31, 2009
|
53,995 | |||
|
Accrued
interest on unrecognized tax benefit
|
(21,177 | ) | ||
|
Effect of
foreign currency translation
|
16,195 | |||
|
Balance at
March 31, 2010
|
49,013 |
It is possible that
the amount of unrecognized tax benefits will change in the next twelve months,
however, an estimate of the range of the possible change cannot be made at this
time due to the long time to reach a settlement agreement or decision with the
taxing authorities.
The Company and its
subsidiaries file income tax returns in Brazil and they are subject to income
tax examinations by the relevant tax authorities for the years 2005 through
2010.
55
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
18.
|
Shareholders’
equity
|
a.
Capital
On August 1, 2007,
Cosan became the controlling shareholder of Cosan S.A. in which it holds 51%
interest.
This was carried
out by means of a corporate reorganization involving Cosan’s former direct
controlling shareholders, Usina Costa Pinto S.A. Açúcar e Álcool (“Usina Costa
Pinto”) and Aguassanta Participações S.A. (“Aguassanta Participações”). These
shareholders contributed capital to Cosan in the form of Cosan’s common shares,
as stated below, thus becoming part of Cosan S.A.’s indirect ownership
structure:
|
Shareholder
|
Number
of shares of Cosan’s issue contributed as capital to Cosan
Limited
|
Interest
held in Cosan
|
||||||
|
Usina Costa
Pinto
|
30,010,278 | 15.89 | % | |||||
|
Aguassanta
Participações
|
66,321,766 | 35.11 | % | |||||
| 96,332,044 | 51.00 | % | ||||||
Subsequently,
Aguassanta Participações proceeded with a corporate restructuring involving its
interest held in Cosan. As a result of this restructuring, the equity interest
formerly held by Aguassanta Participações directly in Cosan turned into indirect
interest, by means of holding companies in Brazil and abroad. Upon completion of
this corporate restructuring, the ownership structure of Cosan was as
follows:
|
Shareholder
|
Class
of shares
|
Number
of shares
|
Interest
|
|||||||||
|
Usina Costa
Pinto
|
B1
|
30,010,278 | 11.09 | % | ||||||||
|
Queluz
Holdings Limited
|
B1
|
66,321,766 | 24.50 | % | ||||||||
|
Aguassanta
Participações
|
A
|
16,111,111 | 5.95 | % | ||||||||
|
Other
shareholders
|
A
|
158,244,230 | 58.46 | % | ||||||||
| 270,687,385 | 100.00 | % | ||||||||||
Cosan shares owned
by Usina Costa Pinto and Queluz Holdings Limited are Class B1 shares, which
entitle their holders to 10 votes per share. Other shares are Class A shares,
which entitle holders to 1 vote per share.
56
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
18.
|
Shareholders’ equity
(Continued)
|
a.
Capital (Continued)
On August 17, 2007,
Cosan concluded its Global Initial Public Offering (IPO) at the New York Stock
Exchange by offering 111,678,000 Class A common shares. As of that date, Cosan
priced its IPO at US$10.50 per Class A share. As a result of the Global Offering
Cosan’s shares are traded on the New York Stock Exchange (NYSE) and on the São
Paulo Stock Exchange (BOVESPA) by BDR (Brazilian Depositary
Receipts).
Cosan S.A. and
Cosan announced the Share Acquisition Voluntary Public Offering (OPA) where
Cosan aimed to acquire up to 100% of the unowned common shares of Cosan S.A.
through and exchange for Class A shares depositary receipts (BDRs), for Class A
shares issued by Cosan.
Upon the conclusion
of the OPA on April 18, 2008, 18,232,812 shares of Cosan were exchanged,
representing an increase in its interest in Cosan S.A. of 6.7%.
On October 27,
2008, Cosan Limited announced the results of the subscription of its class A
common shares by certain investment funds managed by no Gávea Investimentos
Ltda. (“Gávea Funds”) and by Queluz Holding Limited, the controlling shareholder
of the Company.
In accordance with
the terms of the private placement announced on October 16, 2008, (i) the Gávea
Funds subscribed 33,333,333 class A common shares and/or Brazilian Depositary
Receipts, or “BDRs”, each representing one class A common share, at the issue
price of US$4.50 per share and/or BDR, in the amount of US$150 million; and (ii)
Queluz Holding Limited subscribed 11,111,111 new class A common shares at the
same price, in the amount of US$50 million.
As a result of the
private placement and the subscription offer, the Company issued 44,444,529 new
class A common shares and/or BDRs and its share capital now consists
of:
|
Shareholder
|
Class
A shares and/or BDRs
|
%
|
Class
B shares
|
%
|
||||||||||||
|
Queluz
Holding Limited
|
11,111,111 | 6.37 | 66,321,766 | 68.85 | ||||||||||||
|
Usina Costa
Pinto S.A. Açúcar e Álcool
|
- | - | 30,010,278 | 31.15 | ||||||||||||
|
Aguassanta
Participações S.A.
|
5,000,000 | 2.87 | - | - | ||||||||||||
|
Gávea
Funds
|
33,333,333 | 19.12 | - | - | ||||||||||||
|
Others
|
124,910,897 | 71.64 | - | - | ||||||||||||
|
Total
|
174,355,341 | 100.00 | 96,332,044 | 100.00 |
57
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
18.
|
Shareholders’ equity
(Continued)
|
On September 19,
2008, Cosan S.A. undertook a capital subscription of 55,000,000 common shares
which was completed on October 20, 2008. Since a number of the noncontrolling
interests did not exercise their subscription rights, the Company acquired
54,993,482 of the shares for US$456,034, and the minority shareholders acquired
the remaining 6,518 shares for US$50. In connection with this subscription, the
shareholders received one Subscription Warrant (Warrant) for each new share.
Each Warrant grants its holder the right to subscribe 0.6 common shares, with
the distribution of fractional shares not being permitted. Therefore, the
Company received Warrants, which are valid through December 31, 2009, to
purchase 32,996,089 additional common shares of Cosan S.A.. Since Cosan S.A. is
a consolidated subsidiary, the Warrants recorded by Cosan S.A. have been
eliminated in consolidation.
On September 14,
2009, the Company sold to third parties 10,000,000 of the Warrants for
US$14,362, which resulted in a gain which is recorded as financial income. The
basis of the Warrants which were sold, amounting to US$4,594, has been
reclassified from additional paid-in capital to noncontrolling interest. At
December 31, 2009, 54,987,552 warrants have been exercised, of which 44,993,482
were exercised by the Company, 9,994,070 were exercised by noncontrolling
shareholders and the remaining 12,448 warrants expired. The exercise of the
warrants of Cosan S.A. resulted in the issuance of 32,992,531 common shares,
valued at US$301,145. Of this amount, the Company received 26,996,089 common
shares valued at US$267,753.
In connection with
the acquisition of Curupay, Cosan S.A. issued 44,300,389 new common shares (Note
8). Since these shares were issued to noncontrolling interests, this diluted the
Company’s ownership interest which resulted in an increase in additional paid-in
capital of US$9,840.
58
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
19.
|
Share-based
compensation
|
In the ordinary and
extraordinary general meeting held on August 30, 2005, the guidelines for the
outlining and structuring of a stock option plan for Cosan S.A. officers and
employees were approved, thus authorizing the issue of up to 5% of shares
comprising Cosan S.A.’s share capital. This stock option plan was outlined to
attract and retain services rendered by officers and key employees, offering
them the opportunity to become shareholders of Cosan S.A. On September 22, 2005,
Cosan S.A.’s board of directors approved the distribution of stock options
corresponding to 4,302,780 common shares to be issued or treasury shares held by
Cosan S.A. related to 3.25% of the share capital at the time, authorized by the
annual/extraordinary meeting. The remaining 1.75% remains to be distributed. On
September 22, 2005, the officers and key employees were informed regarding the
key terms and conditions of the share-based compensation
arrangement.
According to the
market value on the date of issuance, the exercise price is US$2.64 (two dollars
and sixty four cents) per share which does not include any discount. The
exercise price was calculated before the valuation mentioned above based on an
expected private equity deal which did not occur. Options may be exercised after
a one-year vesting period starting November 18, 2005, at the maximum percentage
of 25% per year of the total stock options offered by Cosan S.A. The options for
each 25% have a five-year period to be exercised.
On September 11,
2007, the board of directors approved an additional distribution of stock
options, in connection with the stock option plan mentioned above, corresponding
to 450,000 common shares to be issued or purchased by Cosan S.A. related to
0.24% of the share capital at September 22, 2005. The remaining 1.51% may still
be distributed.
On August 7, 2009,
the board of directors approved an additional distribution of stock options, in
connection with the stock option plan mentioned above, corresponding to 165,657
common shares to be issued or purchased by Cosan S.A. Such options were issued
without a vesting period; therefore the intrinsic value at grant date was the
basis for calculating the fair value of the options, at US$9.82 per option, and
an expense of US$1,071 was fully recorded by the Company.
The exercise of
options may be settled only through issuance of new common shares or treasury
shares.
59
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
19.
|
Share-based compensation
(Continued)
|
The employees that
leave Cosan S.A. before the vesting period will forfeit 100% of their rights.
However, if the employment is terminated by Cosan S.A. without cause, the
employees will have right to exercise 100% of their options of that particular
year plus the right to exercise 50% of the options of the following
year.
The fair value of
share-based awards was estimated using a binominal model with the following
assumptions:
|
Options
granted on September 22, 2005
|
Options
granted on September 11, 2007
|
Options
granted on August 7, 2009
|
||||||||||
|
Grant price -
in U.S. dollars
|
3.43 | 3.43 | 3.43 | |||||||||
|
Expected life
(in years)
|
7.5 | 7.5 |
Immediate
|
|||||||||
|
Interest
rate
|
14.52 | % | 9.34 | % | (1 | ) | ||||||
|
Expected
Volatility
|
34.00 | % | 46.45 | % | (1 | ) | ||||||
|
Expected
Dividend yield
|
1.25 | % | 1.47 | % | (1 | ) | ||||||
|
Weighted-average
fair value at grant date - in U.S. dollars
|
6.93 | 10.22 | (1 | ) | ||||||||
(1)
The options were fully vested at the date of issuance so the fair value was the
quoted market price as of the grant date.
Expected Term – Cosan S.A.’s
expected term represents the period that Cosan S.A.’s share-based awards are
expected to be outstanding and was determined based on the assumption that the
officers will exercise their options when the exercise period is over.
Therefore, this term was calculated based on the average of 5 and 10 years.
Cosan S.A. does not expect any forfeiture as those options are mainly for
officers, whose turnover is low.
60
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
19.
|
Share-based compensation
(Continued)
|
Expected Volatility – For the
options granted on September 22, 2005 Cosan S.A. had its shares publicly-traded
for less than 6 months as of April 30, 2006. Therefore, Cosan S.A. opted to
substitute the historical volatility by an appropriate global industry sector
index, based on the volatility of the share prices, and considering it as an
assumption in its valuation model. Cosan S.A. has identified and compared
similar public entities for which share or option price information is available
to consider the historical, expected, or implied volatility of those entities’
share prices in estimating expected volatility based on global scenarios. For
the options granted on September 11, 2007 Cosan S.A. used the volatility of its
shares as an assumption in its valuation model since Cosan S.A.’s IPO in Brazil,
in 2005.
Expected Dividends – As the
Cosan S.A. is a relatively new public entity, the expected dividend yield was
calculated based on the current value of the stock at the grant date, adjusted
by the average rate of the return to shareholders for the expected term, in
relation of future book value of the shares.
Risk-Free Interest Rate -
Cosan S.A. bases the risk-free interest rate used in the Binominal Model
valuation method on the implied yield currently available on SELIC -Special
System Settlement Custody, which is the implied yield currently available on
zero-coupon securities in Brazil.
As of March 31,
2010, the amount of US$1,662 related to the unrecognized compensation cost
related to stock options is expected to be recognized in 6 months.
Stock option
activity for the year ended March 31, 2010 and eleven-month period ended March
31, 2009, is as follows:
|
Option
|
Weighted-average
exercise price
|
|||||||
|
Outstanding
as of April 30, 2008
|
2,373,341 | 3.62 | ||||||
|
Exercises
|
(736,852 | ) | 2.64 | |||||
|
Forfeitures
or expirations
|
(165,657 | ) | 2.64 | |||||
|
Outstanding
as of March 31, 2009
|
1,470,832 | 2.64 | ||||||
|
Grants of
options
|
165,657 | 3.43 | ||||||
|
Exercises
|
(982,513 | ) | 3.43 | |||||
|
Outstanding
as of March 31, 2010
|
653,976 | 3.43 | ||||||
|
Shares
exercisable at March 31, 2010
|
408,819 | 3.43 | ||||||
|
Shares
exercisable at March 31, 2009
|
736,852 | 2.64 |
61
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
20.
|
Risk
management and financial
instruments
|
a.
Risk management
The commodity and
foreign exchange rates price volatilities are the main market risks to which
Cosan and its subsidiaries are exposed. Cosan carries out operations involving
financial instruments with a view to managing such risks.
These risks and
related instruments are managed through the definition of strategies,
establishment of control systems and determination of foreign exchange, interest
rate and price change limits.
b.
Price risk
Cosan carries out
transactions involving derivatives, with a view to reducing its exposure to
sugar price variations in the foreign market. Such transactions generally assure
an average minimum income for future production. Cosan actively manages the
positions contracted and relevant results of such activity are continually
monitored, so as to allow that adjustments be made to goals and strategies
considering changes in market conditions. Cosan operates mainly in futures and
options markets on the NYBOT (New York Board of Trade) and the LIFFE (London
International Financial Futures and Options Exchange).
c.
Foreign exchange risk
Cosan carries out
transactions involving derivatives, with a view to reducing its exposure to
foreign exchange rate variations on exports. Foreign exchange derivative
transactions combined with commodity price derivatives generally assure an
average minimum income for future production. Cosan actively manages the
positions contracted and relevant results of such activity are continually
monitored, so as to allow that adjustments be made to goals and strategies
considering changes in market conditions. Cosan operates mainly through futures
contracts over BM&F (“Bolsa de Mercadorias e Futuros de São Paulo”) and in
the over-the-counter segment with leading institutions.
Additionally, Cosan
has also engaged in currency and interest rate swap operations for charges
associated to Senior Notes, from the U.S. dollar exchange rate variation plus
interest of 9% p.a. to 81% of CDI.
62
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
20.
|
Risk management and financial
instruments (Continued)
|
d.
Interest rate risk
Cosan monitors
fluctuations of the several interest rates linked to its monetary assets and
liabilities and, in the event of increased volatility of such rates, it may
engage in transactions with derivatives so as to minimize such risks. During
2010 Cosan entered into swap contracts to exchange fixed to Libor interest rate
in order to protect against variations in the Libor on certain loan
contracts.
e.
Credit risk
A significant
portion of sales made by the Company and its subsidiaries is intended for a
selected group of highly qualified counterparties, such as trading companies,
fuel distribution companies and large supermarket chains. In connection with the
fuel distribution activity, a diversified customer portfolio, in addition to
following up on the sales financing terms by business segment and their
individual credit limits, are procedures adopted by the Company to minimize
overdue accounts receivable and defaults. Credit risk is managed through
specific rules of client acceptance, credit rating and establishment limits for
customer exposure, including, when applicable, requirement of letters of credit
from a top rated bank and obtaining security interest on credits granted.
Management considers that the credit risk is substantially covered by the
allowance for doubtful accounts. The Company and its subsidiaries historically
do not record material losses on trade accounts receivable.
f.
Debt acceleration risk
As of March 31,
2010 and 2009, Cosan was a party to loan and financing agreements with covenants
generally applicable to these operations, regarding cash generation, debt to
equity ratio and others. These covenants are being complied with by Cosan and do
not place any restrictions on its operations as a going-concern.
63
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
20.
|
Risk management and financial
instruments (Continued)
|
g.
Estimated market values
The following
methods and assumptions were used to estimate the fair value of each main class
of financial instruments:
|
●
|
Accounts receivable and trade
accounts payable: The carrying amounts reported in the balance
sheet for accounts and notes receivable and accounts payable approximate
their fair values.
|
|
●
|
Short-term and long-term debt
and advances from customers: Except when there are published market
prices, the market values of loans and financing were calculated based on
their present value calculated through the future cash flows and using
interest rates applicable to instruments of similar nature, terms and
risks or based on the market quotation of these
securities.
|
The following table
presents the carrying amounts and estimated fair values of Cosan’s financial
instruments at March 31, 2010 and 2009. The fair value of a financial instrument
is the amount at which the instrument could be exchanged in a current
transaction between willing parties.
| 2010 | 2009 | |||||||||||||||
|
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
|
amount
|
value
|
amount
|
value
|
|||||||||||||
|
Financial
assets:
|
||||||||||||||||
|
Cash and cash
equivalents
|
623,675 | 623,675 | 508,784 | 508,784 | ||||||||||||
|
Financial
liabilities:
|
||||||||||||||||
|
Short-term
and long-term debt
|
3,316,728 | 3,316,728 | 2,032,759 | 1,882,847 | ||||||||||||
Assets and
liabilities that are reflected in the accompanying consolidated financial
statements at fair value or have their fair value disclosed in the notes to the
consolidated financial statements are not included in the above disclosures;
such items include derivative financial instruments.
64
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
21.
|
Deferred
gain on sale of investments in
subsidiaries
|
Agrícola Ponte Alta
S.A. is a subsidiary whose principal assets are land used for the growing of
sugarcane for Cosan. On December 15, 2008, the shareholders approved a partial
spin-off of the assets of Ponte Alta and created four new subsidiaries.
Agricultural land was then transferred from Ponte Alta to each of the entities.
On December 30, 2008, two of the entities, Nova Agrícola Ponte Alta S.A. and
Terras da Ponte Alta S.A. were sold to Radar, an affiliate company accounted for
by the equity method. The selling price was fair value, US$123,596, which
resulted in a gain of US$47,080. This gain has previously been deferred since
there were no lease contracts executed for the land, which was being used by
Cosan for a monthly fee. Over the year ended March 31, 2009 the lease contracts
were executed, and the gain is being amortized since then to profit and loss
over the 19 year average term of the leases.
During the year
ended March 31, 2010, the Company has amortized a gain of US$3,394 related to
this sale-leaseback transaction.
|
22.
|
Fair
value measurements
|
Effective May 1,
2008, Cosan adopted ASC 820, Fair Value Measurements (SFAS 157), for all
financial instruments and non-financial instruments accounted for at fair value
on a recurring basis. ASC 820 establishes a new framework for measuring fair
value and expands related disclosures. Broadly, the ASC 820 framework requires
fair value to be determined based on the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction
between market participants. ASC 820 establishes market or observable inputs as
the preferred source of values, followed by assumptions based on hypothetical
transactions in the absence of market inputs.
The valuation
techniques required by ASC 820 are based upon observable and unobservable
inputs. Observable inputs reflect market data obtained from independent sources,
while unobservable inputs reflect market assumptions. These two types of inputs
create the following fair value hierarchy:
Level 1 - Quoted
prices for identical instruments in active markets.
65
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
22.
|
Fair value measurements
(Continued)
|
Level 2 - Quoted
prices for similar instruments in active markets; quoted prices for identical or
similar instruments in markets that are not active; and model-derived valuations
whose inputs are observable or whose significant value drivers are
observable.
Level 3 -
Significant inputs to the valuation model are unobservable.
The following
section describes the valuation methodologies Cosan uses to measure different
financial instruments at fair value.
Derivatives
Cosan uses closing
prices for derivatives included in Level 1, which are traded either on exchanges
or liquid over-the-counter markets.
The remainder of
the derivatives portfolio is valued using internal models, most of which are
primarily based on market observable inputs including interest rate curves and
both forward and spot prices for currencies and commodities. Derivative assets
and liabilities included in Level 2 primarily represent interest rate swaps,
foreign currency swaps and commodity forward contracts.
The following table
presents our assets and liabilities measured at fair value on a recurring basis
at March 31, 2010.
|
Level
1
|
Level
2
|
Total
|
||||||||||
|
Assets
|
||||||||||||
|
Derivatives
|
72,239 | 57,217 | 129,456 | |||||||||
|
Liabilities
|
||||||||||||
|
Derivatives
|
(29,130 | ) | (13,937 | ) | (43,067 | ) | ||||||
66
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
23.
|
Segment
information
|
a.
Segment
information
The following
information about segments is based upon information used by Cosan’s senior
management to assess the performance of operating segments and decide on the
allocation of resources. Cosan’s operating and reportable segments are business
units in Brazil that target different industry segments. Each reportable segment
is managed separately because of the need to specifically address customer needs
in these different industries. The operations of these segments are based solely
in Brazil.
In
2010, in connection with some management changes and realignment of the
business, management has combined the Sugar and Ethanol segments into the Sugar
and Ethanol (“S&E”) segment. This change reflects the manner in
which the Chief Operating Decision Maker evaluates the business and allocates
resources. The S&E segment mainly operates and produces a broad variety of
sugar and ethanol products. These products are produced in the same
facilities using the same basic raw material – sugarcane. The plants
have the flexibility of being configured to produce either of the two finished
products which provides management the ability to adjust production based on
market demand. Disclosures relating to this operating segment also include the
revenues of the two major products. The prior year amounts have been
reclassified to reflect the combination of the Sugar and Ethanol
Segments.
Additionally, the
current year acquisition of Teaçú and Curupay and their combination with the
Novo Rumo business has resulted in a new operating segment that is called Sugar
Logistics (“RUMO”).
Following is a
description of the operating segments of the business.
67
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
23.
|
Segment information
(Continued)
|
a.
Segment
information (Continued)
The Sugar and
Ethanol (“S&E”) segment produces and sells a broad variety of sugar and
ethanol products. The sugar products include raw (also known as very high
polarization - VHP sugar), organic, crystal and refined sugars, which are sold
to a wide range of customers in Brazil and abroad. Cosan exports themajority of
the sugar produced through international commodity trading companies. Cosan’s
domestic customers include wholesale distributors, food manufacturers and retail
supermarkets, through which it sells its “Da Barra” and “União” branded
products. The ethanol products include fuel ethanol and industrial
ethanol. Cosan’s principal fuel ethanol products are hydrous and anhydrous.
Hydrous ethanol is used as an automotive fuel and anhydrous (which has a lower
water content than hydrous ethanol) is used as an additive in gasoline. The fuel
ethanol products are mainly sold in the domestic market by fuel distribution
companies. Consumption of hydrous ethanol in Brazil is increasing as a result of
the introduction of flex fuel vehicles that can run on either gasoline or
ethanol (or a combination of both). In addition, S&E segment
sells also liquid and gel ethanol products used mainly in the production of
paint and cosmetics and alcoholic beverages for industrial clients in various
sectors. The S&E segment includes also the co-generation activities and most
of corporate activities.
The Fuel
Distribution and Lubricants (“CCL”) segment is engaged in the distribution in
Brazil of fuel products, derived from petroleum or ethanol, and lubricants as
well as the operation of convenience stores. The network to which the fuel
distribution segment distributes such products is comprised of approximately
1,700 fuel stations.
The Sugar Logistic
(“Rumo”) segment provides logistics services for the transport, storage and port
lifting of sugar for both the S&E segment and third parties.
The accounting
policies underlying the financial information provided for the segments are
based on Brazilian GAAP. We evaluate
segment performance based on information generated from the statutory accounting
records.
68
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
23.
|
Segment information
(Continued)
|
a.
Segment
information (continued)
Segment profit and
loss and selected balance sheet data under Brazilian GAAP is as
follows:
|
2010
|
||||||||||||||||||||
|
S&E
|
CCL
|
Rumo
|
Adjustments
/ eliminations (1)
|
Consolidated
|
||||||||||||||||
|
Brazilian
GAAP
|
US
GAAP
|
|||||||||||||||||||
|
Balance
sheet:
|
||||||||||||||||||||
|
Property,
plant & equipment (PP&E)
|
2,775,752 | 199,983 | 165,094 | 1,005,670 | 4,146,499 | |||||||||||||||
|
Goodwill and
Intangible assets, net
|
735,198 | 774,716 | 38,824 | 415,596 | 1,964,334 | |||||||||||||||
|
Loans, net of
cash equivalents
|
(2,443,354 | ) | (249,839 | ) | (59,799 | ) | 59,939 | (2,693,053 | ) | |||||||||||
|
Other assets
net of other liabilities
|
2,113,306 | 342,720 | 7,696 | (2,198,446 | ) | 265,276 | ||||||||||||||
|
Total
net assets
|
3,180,902 | 1,067,580 | 151,815 | (717,241 | ) | 3,683,056 | ||||||||||||||
|
Income
statement (12 months):
|
||||||||||||||||||||
|
Net
sales
|
2,882,935 | 5,436,199 | 84,797 | (120,780 | ) | 8,283,151 | ||||||||||||||
|
Gross
profit
|
703,108 | 412,866 | 22,896 | (78,984 | ) | 1,059,886 | ||||||||||||||
|
Selling,
general and administrative expenses (SG&A)
|
(455,906 | ) | (264,081 | ) | (9,705 | ) | (11,890 | ) | (741,582 | ) | ||||||||||
|
Other income
(expenses)
|
167,293 | 9,071 | 2,149 | 433 | 178,946 | |||||||||||||||
|
Other
selected data:
|
||||||||||||||||||||
|
Addition to
PP&E (“Capex”)
|
948,838 | 49,579 | 83,067 | - | 1,081,484 | |||||||||||||||
|
Depreciation
and amortization
|
313,324 | 20,067 | 7,591 | 147,534 | 488,516 | |||||||||||||||
(1)
Refers to the consolidation eliminations and adjustment to USGAAP.
69
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
23.
|
Segment information
(Continued)
|
a.
Segment
information (continued)
|
2009
|
||||||||||||||||||||
|
S&E
|
CCL
|
Rumo
|
Adjustments
/ eliminations (1)
|
Consolidated
|
||||||||||||||||
|
Brazilian
GAAP
|
US
GAAP
|
|||||||||||||||||||
|
Balance
sheet:
|
||||||||||||||||||||
|
Property,
plant & equipment (PP&E)
|
1,330,266 | 128,712 | 29,414 | 771,035 | 2,259,427 | |||||||||||||||
|
Goodwill and
Intangible assets, net
|
423,571 | 966 | - | 707,398 | 1,131,935 | |||||||||||||||
|
Loans, net of
cash equivalents
|
(1,122,560 | ) | 39,663 | 4,811 | (445,889 | ) | (1,523,975 | ) | ||||||||||||
|
Other assets
net of other liabilities
|
2,943,642 | (78,223 | ) | (1,469 | ) | (2,590,572 | ) | 273,378 | ||||||||||||
|
Total net
assets
|
3,574,919 | 91,118 | 32,756 | (1,558,028 | ) | 2,140,765 | ||||||||||||||
|
Income
statement (11 months):
|
||||||||||||||||||||
|
Net
sales
|
1,561,118 | 1,549,359 | 26,862 | (210,879 | ) | 2,926,460 | ||||||||||||||
|
Gross
profit
|
297,183 | 94,719 | 6,877 | (94,180 | ) | 304,599 | ||||||||||||||
|
Selling,
general and administrative expenses (SG&A)
|
(264,947 | ) | (85,577 | ) | (2,866 | ) | (14 | ) | (353,404 | ) | ||||||||||
|
Other income
(expenses)
|
93,529 | 779 | 5,387 | (101,985 | ) | (2,290 | ) | |||||||||||||
|
Other
selected data:
|
||||||||||||||||||||
|
Addition to
PP&E (“Capex”)
|
574,112 | 4,881 | 2,433 | 24,729 | 606,155 | |||||||||||||||
|
Depreciation
and amortization
|
203,832 | 6,299 | 2,94 | 77,662 | 290,739 | |||||||||||||||
(1)
Refers to the consolidation eliminations and adjustment to USGAAP.
|
2008
|
||||||||||||||||||||
|
S&E
|
CCL
|
Rumo
|
Adjustments
/ eliminations (1)
|
Consolidated
|
||||||||||||||||
|
Brazilian
GAAP
|
US
GAAP
|
|||||||||||||||||||
|
Income
statement (12 months):
|
||||||||||||||||||||
|
Net
sales
|
1,482,573 | - | 28,159 | (19,499 | ) | 1,491,233 | ||||||||||||||
|
Gross
profit
|
189,048 | - | 3,176 | (46,583 | ) | 145,641 | ||||||||||||||
|
Selling,
general and administrative expenses (SG&A)
|
(276,995 | ) | - | (4,139 | ) | (2,616 | ) | (283,750 | ) | |||||||||||
|
Other income
(expenses)
|
2,712 | - | (948 | ) | (5,434 | ) | (3,670 | ) | ||||||||||||
(1)
Refers to the consolidation eliminations and adjustment to USGAAP.
70
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
23.
|
Segment information
(Continued)
|
b.
Detailed net sales per segment
|
2010
|
2009
|
2008
|
||||||||||
|
S&E
(Brazilian GAAP)
|
||||||||||||
|
Sugar
|
1,810,005 | 900,424 | 781,809 | |||||||||
|
Ethanol
|
936,473 | 586,633 | 612,397 | |||||||||
|
Cogeneration
|
50,146 | 7,532 | - | |||||||||
|
Other
|
86,311 | 66,529 | 88,367 | |||||||||
| 2,882,935 | 1,561,118 | 1,482,573 | ||||||||||
|
CCL
(Brazilian GAAP)
|
||||||||||||
|
Fuels
|
5,056,969 | 1,443,537 | - | |||||||||
|
Lubricants
|
339,752 | 92,969 | - | |||||||||
|
Other
|
39,478 | 12,853 | - | |||||||||
| 5,436,199 | 1,549,359 | - | ||||||||||
|
Rumo
(Brazilian GAAP)
|
||||||||||||
|
Port
lifting
|
76,155 | 26,862 | 28,159 | |||||||||
|
Transports
|
8,642 | - | - | |||||||||
| 84,797 | 26,862 | 28,159 | ||||||||||
|
Adjustments /
eliminations
|
(120,780 | ) | (210,879 | ) | (19,499 | ) | ||||||
|
Total
(US-GAAP)
|
8,283,151 | 2,926,460 | 1,491,233 | |||||||||
c. Net
Sales by region
The percentage of net Sales by
geographic area are as follows:
|
2010
|
2009
|
|||||||
|
Brazil
|
86,4 | % | 73,6 | % | ||||
|
Europe
|
9,2 | % | 18,5 | % | ||||
|
Latin
American (except Brazil)
|
2,8 | % | 5,0 | % | ||||
|
Middle east
and Asia
|
1,2 | % | 1,9 | % | ||||
|
North
America
|
0,3 | % | 0,9 | % | ||||
|
África
|
0,1 | % | 0,1 | % | ||||
|
Total
|
100,0 | % | 100,0 | % | ||||
d. Concentration
of clients
S&E
There are several
clients in this segment, one of which represents more than 10% of the segment
net sales -- the SUCDEN Group (17% in 2010 and 14% in 2009).
CCL
In
this segment there are no clients that represent more than 10% of the net
sales.
71
COSAN
LIMITED
Notes to the
consolidated financial statements
Year ended March
31, 2010, eleven-month period ended March 31, 2009 and year ended
April 30,
2008
(In thousands of
U.S. dollars, unless otherwise stated)
|
23.
|
Segment information
(Continued)
|
d. Concentration
of clients (continued)
Rumo
In
2010 33% of the segment net sales were generated from sales to the S&E
segment (52% in 2009). There two other customers which represented more than 10%
of the net sales of this segment. SUCDEN Group accounted for 16% of
segment sales (14% in 2009) and the ED&F Man Group accounted for 14% (no
sales in the previous year).
72
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Management Report
March 31st,
2010
Cosan
Limited
MANAGEMENT
REPORT
March 31,
2010
The
results from Cosan Limited during the fiscal year ended on March 31st, 2010,
were significantly related to the results from its subsidiary Cosan S.A.
Industria e Comércio and the notes from the Management are valid for both
Companies.
In compliance with
legal and statutory provisions, Cosan S.A. Indústria e Comércio submits for
appreciation by its shareholders the Management Report and relevant Financial
Statements, together with the Opinion of the Independent Auditors, relative to
the fiscal years ended March 31, 2010 and 2009, prepared in accordance with
accounting practices adopted in Brazil. The Financial Statements prepared
according to generally accepted accounting principles of the United States of
America (US GAAP), expressed in U.S. dollars, are available in the Investors
Relations section of our site www.cosan.com.br.
The Company also makes available a detailed version of the Financial Statements
and its release on results on site www.cosan.com.br/ri.
On account of the
alteration of fiscal year 2009, which brought forward its closing date to March
31, 2009, the periods for fiscal years 2009 and 2010 are mismatched, i.e.,
fiscal year 2009 consists of only 11 months, for the interval from May 2008 to
March 2009, while fiscal year 2010 comprises the 12 months from April 2009 to
March 2010;
MESSAGE
FROM MANAGEMENT
This fiscal year
was marked by the consolidation and alteration of the strategy of
diversification of the business model implemented in the previous year. After
more than one year since the acquisition of Esso Brasileira de Petróleo
(presently named CCL – Cosan Combustíveis e Lubrificantes S.A.) we can present
the results obtained and the benefits secured from implementation of a new
fully-integrated business platform. With the well-defined and solid business
model, Cosan has positioned itself to capture any opportunities that could arise
and to differentiate itself from competitors through its competitive
edges.
With a vision of
growth, but without losing focus on sustainability, in these six months Cosan
has been able to (i) increase its crushing capacity with the acquisition of
NovAmérica (currently named CAL – Cosan Alimentos) and the start-up of the
greenfield projects (Jataí and Caarapó), (ii) advance in its plan of investment
in co-generation of energy using cane bagasse, (iii) increase its presence in
the logistics segment, with the
73
COSAN
LIMITED
Management Report
March 31st,
2010
creation and
commencement of activities of Rumo Logística, and (iv) through execution of a
non-binding memorandum of understanding with Shell, thereby enabling itself to
become the most efficient player in the distribution of fuel in
Brazil.
The acquisition of
the Cosan Alimentos mills in the first quarter of 2010 increased our crushing
capacity by 10 million tons of cane, provided better exposure to the domestic
sugar market, principally with the portfolio of the UNIÃO brand, in a year when
sugar attained historical record prices. In addition, Cosan also acquired
NovAmérica’s participation of 28.2% at Rumo Logística, increasing its stake to
approximately 93%.
The energy
co-generation project continued to be implemented in the course of this fiscal
year, so that the next crop year can be initiated with the new co-generation
units ready to commence sale of energy through contracts that have been
executed. These new units are expected to more than double the generation of
cash in the co-generation segment, which will help to reduce the volatility of
our future sugar and ethanol – CAA - results, increasing their
predictability.
The process of
organic growth initiated with the construction of a new mill, Jataí, in the
State of Goiás, showed Cosan’s capability of expanding sugarcane frontiers
beyond the State of São Paulo, with state-of-the- art and modern technology and
with efficiency well above the national average. Cosan also concluded the
Greenfield acquired from NovAmérica, located in the city of Caarapó, in the
State of Mato Grosso do Sul.
The new business,
named Rumo Logística, positions Cosan as the principal sugar logistics player in
Brazil. In addition to coping with one of the main infrastructure bottlenecks in
Brazil, Cosan will be able to offer a service with quality, efficiency and
competitive costs to all Brazilian sugar producers, through a partnership with
ALL in rail transportation of bulk sugar and other sub-products. The new
railcars and locomotives purchased by Rumo Logística are among the most modern
in the world and will be able to carry up to approximately 11 million tons of
sugar, when the expected investments are completed in 2013.
The signing of the
memorandum of understanding between Cosan and Shell demonstrates that we are
following the correct strategy. The new joint venture (“JV”) still needs to have
its terms approved and defined by both companies and by the pertinent regulating
agencies, in addition to completion of the due diligence process by both
parties. The businesses in which Cosan operates and that will be part of the
Joint Venture are sugar and ethanol, including operations of energy
co-generation, distribution and commercialization of fuel, the ethanol logistics
assets and the totality of its equity participation in a company that
commercializes ethanol, totaling assets to be contributed estimated at US$4,925
million. Cosan will contribute to the JV net debts amounting to approximately
US$2,524 million. In consideration, Shell will contribute to the JV its fuel
distribution and commercialization assets in Brazil (retail and aviation) and
its participation
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Management Report
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2010
in companies
involved with research and development of use of biomass, including ethanol.
Furthermore, Shell will effect within two years a cash capital contribution
amounting to approximately US$1,625 million and a contingent contribution
estimated by Cosan at US$300 million, in the course of a period of approximately
5 years, on account of additional input based on future earnings of the joint
structure.
The challenges for
the next fiscal year are even greater, principally after closing of the joint
venture with Shell. The new integration and management processes will capture
major synergies in all of our business units. The quest for an even more
efficient company that can assure its sustainable growth, providing increasingly
cleaner energy for people’s lives will continue to guide us throughout the next
year.
Market
and Sector Overview
According to UNICA,
the sugarcane growers’ association, crushed cane volume in Brazil’s
central-south region totaled 541.9 million tonnes in the 2009/10 crop, 7.3% up
compared to the previous harvest. Sugar production increased by 7.3% to reach
28.6 million tonnes, while ethanol output dropped by 5.6% to 23.7 billion
liters, of which hydrous ethanol accounted for 17.5 billion liters and anhydrous
ethanol for 6.2 billion liters, an increase of 3.8% and decrease of 24.8%,
respectively, in relation to the previous harvest. This reflects the crop
shortfall due to record level of rains during the crop, when the weather is
usually dry, which not only decreased the number of crushing days but also the
sucrose content of the total sugar recoverable (TSR) in the cane to 130.25 kg/t,
compared to 140.88 kg/t in the previous harvest. In addition, due to increase in
sugar prices in the international market during the crop, the production mix
continued to prioritize sugar (42.6%) compared to the previous
year.
UNICA estimates
that the total crushed cane volume for the 2010/11 crop will reach 595.9 million
tonnes in Brazilian Central-South region, which, combined with an improve of TSR
to 138.59 kg/t and 43.29% of cane towards sugar production, maintaining the
production mix more focused on sugar compared to last year’s, will result in
34.1 million tonnes of sugar, 20.1 billion liters of hydrous ethanol and 7.3
billion liters of anhydrous ethanol, an increase of 19.1%, 15.4% and 16.2%,
respectively. These projections are mainly the result of (i) greater
agricultural productivity (tonnes of cane / hectare) due to the higher level of
rains during the planting and growth of sugarcane, despite such adverse effects
as the orange rust of sugarcane, which may affect certain cane varieties and the
aging of the field; (ii) higher yield of sucrose (TSR) in the cane as a result
of a more favorable weather conditions for harvesting and maturing of the cane,
despite the higher volume of cane left on the field, anticipation of the
beginning of harvest and the evolution of mechanical harvesting; and the (iii)
increase in crushing capacity as result of the startup of 10 new mill units and
ramp-up of the harvesting area of those that started operating in the previous
harvests, effect that started to vanish due to the lower investment level
compared to the peak in 2007 and 2008 in the sector.
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The latest UNICA
data indicate an increase of crushed cane volume in beginning of 2010/11 crop,
until May 16th, totaling 93.9 million tones, 27.1% higher on the same period in
the last crop, mainly due to the advance of sugarcane harvest. The production
mix in the period continues to prioritize sugar to attend the contracts which
could not be performed last year, being 41.9% of production directed to this
product and 58.1% for ethanol. Sugar production reached 4.4 million tonnes, an
increase of 38.7% than last crop, while ethanol output stood at 3.8 billion
liters, with 2.9 billion liters of hydrous ethanol and 829 million liters of
anhydrous ethanol, an increase of 11.5% and 74.6%, respectively.
In this quarter,
raw sugar prices averaged 24.52 US¢/lb, 92.8% up over 4Q09 and 3.6% up over
3Q10. It is important to note the variation of prices in the period: after
rallying in January, when sugar price reached 29.9 US¢/lb, the highest in 29
years, prices dropped by 44.5% until the end of the quarter. The downward trend
continued, reaching the lowest point of 13.67 US¢/lb in the beginning of May,
54.3% down from the peak in January.
This can be
explained by some factors: (i) export of 500,000 tonnes of out-of-quota sugar to
the European Union, as mentioned in the last Financial Letter; (ii) export of
nearly 1 million tonnes of sugar from Brazil in the quarter, which was not
expected by the market based on the estimates of initial inventories for the
harvest; (iii) the recovery and extension of the Indian crop, which usually ends
in March and was estimated between 13 and 15 million tonnes. In May, there were
still several mills processing cane, with new estimates between 18 and 19
million tonnes; (iv) the deferral of demand in response to the higher prices;
(v) the prospect of better weather conditions for the 2010/11 crop in Brazil and
India, resulting in more optimistic sugar production estimates ranging from
32-35 to 24-25 million tonnes, respectively.
On the other hand,
world sugar inventories are much lower compared to historical levels and need to
be recomposed. Moreover, there are several uncertainties concerning the crop in
some countries, for example: (i) in Brazil and India, if the weather conditions
are not as adequate as expected, production will be lower than expected; (ii)
the announcement by the Pakistani government of its intention to buy
approximately 900,000 tonnes; (iii) potential imports from China to recompose
strategic inventories, given that these were released to curb inflation in the
domestic market after a bad crop; (iv) the possibility that the United States
will allow additional raw sugar imports to meet domestic demand.
International
refined sugar prices partially followed the downward trajectory of raw sugar
prices, dropping by 37.6% in 61 days. The average price in the period was
US$659.15/t, 75.5% and 7.4% up over 4Q09 and 3Q10, respectively. Due to the lack
of sugar for refining, mainly because Brazil is in the inter-harvest period, the
white premium averaged US$118.58/t.
In 4Q10, the
Brazilian real depreciated against the U.S. dollar to average R$1.80/US$, 3.6%
up from the previous quarter. In the quarter, the Real reached R$1.87/US$, due
to the initial signs of an economic slowdown in Portugal, Italy, Greece and
Spain. The foreign exchange rate at the end of the period was R$1.78/US$,
compared with R$1.74/US$ in December 2009 and R$2.32/US$ in March
2009.
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Domestic crystal
sugar prices (ESALQ) averaged R$70.80/50Kg bag (or 35.65 US¢/lb) in 4Q10, 22.8%
up compared to the previous quarter and 63.7% up on 4Q09. These prices reflect
the lower sugar availability due to the rainy season and strong exports during
the harvest, which amounted to 19.8 million tonnes (from April/09 to
March/10).
In response to the
previously mentioned factors and the macroeconomic conditions, major hedge
funds, plus smaller funds and speculators, who had built positions in the
commodity due to its solid fundamentals, quickly reduced their long sugar
positions, helping with the decline in sugar prices. At the end of 4Q10, the net
long position stood at 158,000 lots, or 15.8% of open contracts, 30.2% down from
the previous quarter.
In the domestic
market, the lower availability of ethanol due to the accelerated demand in 2009
(increase in flex fuel cars sales) and the reduced supply due to the rainy
harvest, resulted in a significant increase in prices of both anhydrous and
hydrous ethanol. Hydrous ethanol prices (ESALQ) averaged R$1.041/liter in 4Q10,
40.8% up YoY and 9.7% up over 3Q10. Anhydrous prices averaged R$1.188/liter,
43.1% higher than 3Q09 and 8.6% up on the previous quarter.
According to
Brazil’s National Petroleum Agency (ANP), the average hydrous ethanol/gasoline
price parity (weighted by the size of the fleet) closed 69% at the end of 4Q10,
returning to below 70% parity in 6 states, which account for more than 50% of
Brazil’s flex-fuel fleet. Between February and May 1st, 2010, the anhydrous
ethanol blend ratio in gasoline reduced from 25% to 20%, yet anhydrous ethanol
consumption remained unchanged compared to February and March 2009, once
gasoline consumption increased significantly as ethanol prices were above parity
during most of the period.
According to
ANFAVEA, the auto manufacturers’ association, flex-fuel vehicle sales in Brazil
totaled 652,700 units in 4Q10, accounting for 87% of new car sales, 16.1% up
year-on-year.
According to
ANP, Diesel sales in the first three months of 2010 totaled 11.1 billion liters,
12.7% up year-on-year. Gasoline A volume increased by a significant 29.7% in the
period, with 5.9 billion liters sold, as ethanol prices were above parity and
percentage of anhydrous ethanol blended in gasoline decreased. For these same
reasons, ethanol consumption dropped by 24.7% in the period to reach 2.8 billion
liters.
Operating
Performance
EBITDA per Business
Unit
77
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|
EBITDA
(R$ MM) - FY'10
|
CAA
|
Rumo
|
CCL
|
Total*
|
||||||||||||
|
Net
Revenues
|
5,380.1 | 158.2 | 10,145.1 | 15,336.1 | ||||||||||||
|
(-) Cost of
Product Sold / Services Rendered
|
(4,068.0 | ) | (115.5 | ) | (9,374.6 | ) | (13,210.7 | ) | ||||||||
|
(=)
Gross Profit
|
1,312.1 | 42.7 | 770.5 | 2,125.4 | ||||||||||||
|
Gross
Margin
|
24.4% | 27.0% | 7.6% | 13.9% | ||||||||||||
|
(-) Selling
Expenses
|
(464.5 | ) | - | (400.1 | ) | (864.6 | ) | |||||||||
|
(-) General
and Administrative Expenses
|
(386.3 | ) | (18.1 | ) | (92.7 | ) | (497.2 | ) | ||||||||
|
(-) Other
Operating Revenues
|
312.2 | 4.0 | 16.9 | 333.1 | ||||||||||||
|
(+)
Depreciation and Amortization
|
584.7 | 14.2 | 37.5 | 636.3 | ||||||||||||
|
(=)
EBITDA
|
1,358.3 | 42.8 | 332.0 | 1,733.1 | ||||||||||||
|
EBITDA
Margin
|
25.2% | 27.0% | 3.3% | 11.3% | ||||||||||||
|
(=)
EBITDAH
|
1,689.2 | 41.8 | 332.0 | 2,063.0 | ||||||||||||
|
EBITDAH
Margin
|
31.4% | 26.4% | 3.3% | 13.5% | ||||||||||||
|
*
Total excludes consolidation
|
||||||||||||||||
Net
Revenue
|
4Q'09
|
4Q'10
|
Sales
Composition (R$MM)
|
FY'09
|
FY'10
|
||||||||||||
| 2,349.8 | 4,394.1 |
Net
Operating Revenue
|
6,270.1 | 15,336.1 | ||||||||||||
| 853.7 | 1,850.2 |
CAA
|
3,129.6 | 5,380.1 | ||||||||||||
| 502.4 | 1,215.5 |
● Sugar
Revenue - CAA
|
1,805.1 | 3,377.8 | ||||||||||||
| 64.1 | 347.7 |
Local
|
233.8 | 1,062.3 | ||||||||||||
| 438.2 | 867.8 |
Export
|
1,571.3 | 2,315.5 | ||||||||||||
| 337.5 | 602.1 |
● Ethanol
Revenue - CAA
|
1,176.0 | 1,747.6 | ||||||||||||
| 257.8 | 549.7 |
Local
|
775.1 | 1,325.9 | ||||||||||||
| 79.8 | 52.4 |
Export
|
401.0 | 421.8 | ||||||||||||
| 3.6 | 5.7 |
● Energy
Cogeneration - CAA
|
15.1 | 92.4 | ||||||||||||
| 10.3 | 26.8 |
● Other
Revenue - CAA
|
133.4 | 162.2 | ||||||||||||
| 9.7 | 38.3 |
Rumo
|
53.9 | 158.2 | ||||||||||||
| 9.7 | 24.9 |
● Loading
|
53.9 | 142.1 | ||||||||||||
| - | 13.4 |
● Transportation
|
- | 16.1 | ||||||||||||
| 1,505.7 | 2,588.7 |
CCL
|
3,106.0 | 10,145.1 | ||||||||||||
| 1,393.7 | 2,401.6 |
● Fuels
Revenue - CCL
|
2,893.9 | 9,437.3 | ||||||||||||
| 106.3 | 170.4 |
Ethanol
|
220.6 | 757.0 | ||||||||||||
| 594.6 | 1,208.6 |
Gasoline
|
1,267.0 | 4,111.0 | ||||||||||||
| 588.1 | 999.3 |
Diesel
|
1,156.3 | 4,338.5 | ||||||||||||
| 104.7 | 23.3 |
Other
|
250.0 | 230.9 | ||||||||||||
| 98.2 | 168.9 |
● Lubes
Revenue - CCL
|
186.4 | 634.0 | ||||||||||||
| 13.8 | 18.1 |
● Other
Revenue - CCL
|
25.8 | 73.7 | ||||||||||||
| (19.3 | ) | (83.0 | ) |
Eliminations
from Consolidation
|
(19.3 | ) |
(347.4
|
) | ||||||||
Net revenue totaled
R$15.3 billion in FY’10, versus R$6.3 billion in the previous year. CCL
accounted for most of this figure, contributing R$10.1 billion, or 66.2% of the
total. CAA’s revenue, which grew by 71.9% to R$5.4 billion, was fueled by the
merger of NovAmérica, higher sugar prices and the start-up of the co-generation
projects.
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Sugar
Sales - CAA
|
Þ
|
Sugar sales totaled R$3.4
billion, 87.1% more than the year before. The main factors contributing to
the R$ 1.6 billion increase
were:
|
|
Þ
|
Record international and
domestic prices, 28.9% and 54.4% above previous year which have
contributed with gains of approximately R$ 453.5 million and R$ 127.3
million, respectively;
|
|
Þ
|
The higher sugar volume sold,
resulted in an additional revenues of R$640.5 million. This increase in
volume can be explained by: (i) NovAmerica consolidation; (ii) the higher
share of sugar in the product mix; (iii) the reduction in carryover
stocks; and (iv) the distortion in the comparison with the previous year,
which had only 11
months.
|
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Sugar
Volume
(thousand tonnes) and Average Unit Price (R$/tonne)
The sugar
inventories in FY’10 were 49.0% lower compared to the previous year, reflecting
the commercial strategy adopted to capture the higher prices over the last
quarter.
Sugar
Inventories
|
4Q'09
|
4Q'10
|
|
|
'000
ton
|
266.4
|
135.8
|
|
R$'MM
|
109.3
|
93.6
|
|
R$/ton
|
410
|
689
|
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Ethanol
Sales – CAA
Ethanol revenue
totaled R$1.7 billion, 48.6%, or R$ 571.6 million, up on FY’09, mainly due
to:
|
Þ
|
Gain of
R$513.2 million from higher ethanol sales, thanks to: (i) the
incorporation of NovAmérica’s plants; (ii) the reduction in carryover
stocks, taking advantage of the higher inter-harvest prices; (iii) the
effect from the comparison with FY’09, which had only 11
months;
|
|
Þ
|
Gain of
R$40.7 million due to the increase in domestic average prices,
notwithstanding the 18.3% decrease in the international average
prices;
|
|
Þ
|
Loss of
R$78.0 million due to higher exports, whose average prices were lower than
domestic ones.
|
Ethanol inventories
were 76.2% lower than in the previous year due to our strategy to capture the
higher prices over the off-season period (4Q’10).
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Ethanol
Inventories
|
4Q'09
|
4Q'10
|
|
|
'000
cbm
|
287.2
|
68.2
|
|
R$'MM
|
201.0
|
56.2
|
|
R$/cbm
|
700
|
824
|
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Energy
co-generation – CAA
|
Þ
|
Energy
revenue totaled R$92.4 million, thanks to growing investments in
co-generation, which are expected to continue recording strong growth in
the coming years. FY’10 was marked by the beginning of energy delivered by
Serra, Gasa, Costa Pinto, Tarumã and Maracaí accordingly to the bi-lateral
sales contracts and/or auctioned electricity sale contracts. Sales volume
totaled 596MWh, at an average of
R$141.6/MWh.
|
Other
Products and Services – CAA
Despite the fact
that revenue from loading services and electricity sales were no longer
considered under CCA’s “Other products and services”, revenue from this line
still grew by 21% chiefly due to sales of molasses, fusel oil and
sugarcane.
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Rumo
In FY’10, Rumo
concluded its first year jointly operating the Cosan Portuária and Teaçú
terminals and began transportation operations through a partnership agreement
with ALL, with total net revenues of R$158.2 million. Loading volume grew by
131.4% over FY’09, from 3.5 million to 8.1 million tonnes, 34.6% of which (or
2.8 million tonnes) being service to Cosan. This result was achieved because of
the merger with Teaçú, NovAmérica’s former terminal, and higher productivity due
to synergies and improvements in operational processes.
The average loading
price increased by 13.0% over FY’09 to R$17.50/ton.
The transportation
agreement entered into with ALL became valid and executable in 4Q’10, generating
additional revenue of R$16.1 million in this quarter.
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Fuel
Sales – CCL
CCL’s recorded
FY’10 net revenue of R$ 10.1 billion, 226.6% up on the previous year, given that
only four months of this company’s results were consolidated in FY’09, as
mentioned previously. Fuel segment revenue totaled R$ 9.4 billion, up by 226.1%.
The main factors contributing to the net revenues achieved in FY’10
were:
|
Þ
|
Ethanol sales
of 803.2 million liters, reflecting record vehicle licensing volume
between April 2009 and March 2010, 88% of which flex-fuel
vehicles;
|
|
Þ
|
Higher
ethanol prices in the inter-harvest period, which not only benefited
hydrous net revenue, but also resulted in an upturn in gasoline sales
volume. This was
because ethanol prices were above 70% parity with gasoline prices in many
Brazilian sates, causing some flex-fuel owners to switch from ethanol to
gasoline, whose prices are higher (average of R$2,207/m3 in FY’10 versus
R$942/m3 of ethanol);
|
|
Þ
|
The
acquisition of new corporate clients, who accounted for an additional 210
million liters of Diesel in FY’10, beyond the Diesel volume sold to
CAA.
|
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March 31st,
2010
Lubricant
Sales – CCL
Lubricant sales
totaled R$634 million, thanks to the increased share of higher added-value
products in the sales mix and the upturn in market share.
CCL
Inventories
(Including
Fuels and Lubricants)
|
4Q'09
|
4Q'10
|
|
|
'000
cbm
|
138.5
|
137.5
|
|
R$'MM
|
274.4
|
266.5
|
|
R$/cbm
|
1,981
|
1,938
|
86
COSAN
LIMITED
Management
Report
March 31st,
2010
Cost of Goods Sold
(COGS)
COGS totaled R$13.2
billion, versus R$5.5 billion in the previous year. This substantial upturn
reflected the 12-month consolidation of fuel and lubricant distribution, which
added R$ 9.4 billion to annual COGS, versus R$2.9 billion in the previous year,
when only four months of this business unit were consolidated. In addition,
CAA’s COGS increased by 60.5%, chiefly due to higher sales volume, sugar
sourcing activities, higher costs for sugar cane acquired from third parties,
the poor harvest and the reduction in TRS, the last two due to excess rainfall
in the harvest period.
|
4Q'09
|
4Q'10
|
COGS
per Product
|
FY'09
|
FY'10
|
|||||||||||
| (2,109.9 | ) | (3,620.3 | ) |
Cost
of Good Sold (R$MM)
|
(5,470.7 | ) | (13,210.7 | ) | |||||||
| (715.9 | ) | (1,296.9 | ) |
CAA
|
(2,533.8 | ) | (4,068.0 | ) | |||||||
| (343.1 | ) | (687.1 | ) |
Sugar
|
(1,313.1
|
) | (2,116.2 | ) | |||||||
| (353.1 | ) | (567.0 | ) |
Ethanol
|
(1,088.9
|
) | (1,745.5 | ) | |||||||
| (19.7 | ) | (42.8 | ) |
Other
Products & Services - CA
|
(131.9
|
) | (206.4 | ) | |||||||
| (8.3 | ) | (24.6 | ) |
Rumo
|
(40.1 | ) | (115.5 | ) | |||||||
| (1,405.0 | ) | (2,381.8 | ) |
CCL
|
(2,916.1 | ) | (9,374.6 | ) | |||||||
| 19.3 | 83.0 |
Eliminations
from Consolidation
|
19.3 | 347.4 | |||||||||||
|
Average
Unit Cost (R$)
|
|||||||||||||||
| 482 | 593 |
Unit COGS of
Sugar (R$/ton)
|
430 | 512 | |||||||||||
| 808 | 1,011 |
Unit COGS of
Ethanol (R$/thousand liters
|
728 | 813 | |||||||||||
| 1,681 | 1,757 |
CCL
(R$/thousand liters)
|
1,700 | 1,668 | |||||||||||
CAA
The cost of goods
sold and services rendered totaled R$4.1 billion, accompanying sugar and ethanol
sales growth and reflecting the merger of NovAmérica and the strong impact of
the upturn in the TSR price (due to higher sugar prices in Brazil and abroad)
and the reduction in TSR mainly due to adverse weather conditions throughout the
harvest.
The R$1.5 billion
increase results from the 19.1% upturn in average unit sugar costs and the 11.6%
rise in average unit ethanol costs, was chiefly due to:
|
Þ
|
The increase
in sugar sourcing (purchase of the raw material to be refined and product
for subsequent resale and distribution on the domestic market), a
traditional NovAmerica practice, whose margins are lower and which had an
impact of R$61 million;
|
|
Þ
|
The increase
of 25.5% in the average TSR price, as calculated by Consecana, from
R$0.2772/Kg of TSR to R$0.3492/Kg of TSR, which pushed up the cost of land
leased and sugarcane acquired from suppliers, adding approximately R$260
million;
|
87
COSAN
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Management
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March 31st,
2010
|
Þ
|
The effect of
lower concentration in the TSR itself (cane sucrose content), from
139.0kg/ton of sugar cane to 129.8kg/ton, surpassed the gains in
efficiency in the process of mechanization of the harvest, leading to
additional costs of R$180
million;
|
|
Þ
|
Thanks to
excessive rainfall, there were less effective crushing days. Consequently,
3.3 million tonnes of cane which were expected to be processed were left
in the fields, generating an impact on the dilution of fixed agricultural
costs (planting, treatment and
leasing).
|
|
Þ
|
Despite the
harvesting difficulties, CLT costs (cutting, loading and transport) has
not increased benefited from the mechanical harvest which accounted for
64.5% of the total harvest, stood at R$6.25/tonne of cane, cheaper than
manual CLT costs.
|
Rumo
Rumo’s COGS totaled
R$115.5 million, including loading and transportation costs, the latter
consisting of costs from transshipment, road and rail freight and
storage.
The variable part
of the loading costs refer mostly to stevedore expenses, port tariffs and
electric power, while the fixed part refers to operational labor, equipment
rental, port leasing costs and maintenance.
CCL
CCL’s average COGS
recorded a decline of R$32/m3 in FY’10, or 2%, lower than FY’09, primarily due
to the reduction in Petrobrás’ Diesel price and lower lubricant costs due to the
appreciation of the Real against the dollar. The reduction of the average unit
cost quoted above occurred despite the upturn in the inter-harvest ethanol
costs, which affected not only hydrous costs but also those of gasoline C, due
to the mandatory gasoline mix with anhydrous ethanol. In addition, between
February and April 2010, the ratio was reduced from 25% to 20% turning even more
expensive the cost of gasoline C.
Gross
Profit
As a result, the
Company recorded a FY’10 gross profit of R$2.1 billion, an increase of 165.9%
compared to the previous year, with a gross margin equivalent to 13.9%. The
ethanol margin recovered throughout the harvest, reaching breakeven at the close
of the year. On the other hand, sugar recorded a positive margin of 37.4%,
partially benefiting from the increase in international prices and sugar’s
greater share of domestic sales. In addition, CCL’s gross unit margin moved up
by R$26/m3 to R$137/m3.
88
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March 31st,
2010
|
4Q'09
|
4Q'10
|
Gross
Margin per Product
|
FY'09
|
FY'10
|
|||||||||||
|
Unitary
Gross Margin
|
|||||||||||||||
| 224 | 456 |
Sugar
(R$/ton)
|
161 | 305 | |||||||||||
| (36 | ) | 63 |
Ethanol
(R$/thousand liters)
|
58 | 1 | ||||||||||
| 120 | 153 |
CCL
(R$/thousand liters)
|
111 | 137 | |||||||||||
|
%
Gross Margin/Net Revenues
|
|||||||||||||||
| 31.7 | % | 43.5 | % |
Sugar
|
27.3% | 37.4% | |||||||||
| -4.6 | % | 5.8 | % |
Ethanol
|
7.4% | 0.1% | |||||||||
| 14.8 | % | 35.7 | % |
Rumo
|
25.6% | 27.0% | |||||||||
| 6.7 | % | 8.0 | % |
CCL
|
6.1% | 7.6% | |||||||||
Selling
Expenses
Selling expenses
increased by 100% compared to the previous year mainly due to the merger of CCL,
which contributed with R$400.1 million, and NovAmérica (R$91.4
million).
|
4Q'09
|
4Q'10
|
Selling
Expenses
|
FY'09
|
FY'10
|
|||||||||||
| (101.5 | ) | (225.3 | ) |
Selling
Expenses (R$MM)
|
(432.6 | ) | (864.6 | ) | |||||||
| (49.1 | ) | (120.6 | ) |
CAA
|
(317.8 | ) | (464.5 | ) | |||||||
| - | - |
Rumo
|
- | - | |||||||||||
| (52.4 | ) | (104.7 | ) |
CCL
|
(114.7 | ) | (400.1 | ) | |||||||
CAA
Excluding the
effects from the NovAmerica merger, CAA recorded selling expenses of R$373.1
million,17.4% higher than the previous year, chiefly due to the following
factors:
|
Þ
|
The higher
sugar exports caused an increase in freight and loading expenses of around
14.4%.
|
|
Þ
|
The increase
of 28% in the volume of ethanol exports, which pushed up selling expenses
by R$11.5 million.
|
|
Þ
|
Certain
initiatives throughout the year to improve the efficiency of make the
domestic sales management, including a reduction in retail commissions and
bonuses through the revision of sales contracts and agreements in the case
of sugar, and the elimination of less profitable
accounts.
|
Rumo
Given the nature of
its business, Rumo has no selling expenses.
CCL
CCL’s selling
expenses are mostly related to salaries and benefits, freight from product
deliveries, maintenance, repairs and environmental expenses and marketing. It is
worth noting that this fiscal year was characterized by investments in
marketing, maintenance
89
COSAN
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Management
Report
March 31st,
2010
and repairs, in
order to improve the image of the service stations, increase brand exposure and
give more visibility to ethanol.
General and Administrative
Expenses
G&A expenses
totaled R$497.2 million, representing 3.2% of FY’10 net revenue, a hefty 80.2%
up on the R$275.9 million recorded in FY’09, primarily due to the entry of
NovAmérica (R$23.7 million), 12 months of expenses from CCL (R$92.7 million) and
Teaçu consolidation by Rumo.
|
4Q'09
|
4Q'10
|
General
& Administrative Expenses
|
FY'09
|
FY'10
|
||||||||||||
| (78.2 | ) | (173.7 | ) |
G&A
Expenses (R$MM)
|
(275.9 | ) | (497.2 | ) | ||||||||
| (62.0 | ) | (131.5 | ) |
CAA
|
(245.4 | ) | (386.3 | ) | ||||||||
| 0.2 | (5.8 | ) |
Rumo
|
(5.7 | ) | (18.1 | ) | |||||||||
| (16.4 | ) | (36.5 | ) |
CCL
|
(24.8 | ) | (92.7 | ) | ||||||||
CAA
G&A expenses
came to R$386.3 million, 57.4% higher than in FY’09, chiefly due to the entry of
NovAmérica. The integration of NovAmérica’s systems only took place in the
second half of 4Q’10, so its full effects will only be reflected as of 1Q’11.
Excluding this impact, G&A expenses increased by 47.8%, due to the following
factors:
|
Þ
|
Increase of
around R$42.0 million due to the provisioning of management and employee
bonus payments;
|
|
Þ
|
Upturn of
around R$20.0 million in expenses from consulting services, due to
projects such as the Shared Services Center (CAN), the implementation of
EVA and various other IT projects, a non-recurring
events.
|
|
Þ
|
Approximately
R$11.0 million from the pay rise following the collective bargaining
agreement and increase in other general expenses, such as travel expenses
driven by geographic dispersion from our current different offices
sites;
|
|
Þ
|
Fine of R$3.5
million levied by ANEEL due to breach of an electricity supply contract by
the Paraúna unit;
|
Rumo
Rumo’s G&A
expenses amounted to R$18.1 million, primarily related to the salaries and
benefits, security, insurance and consulting services.
90
COSAN
LIMITED
Management
Report
March 31st,
2010
CCL
CCL’s G&A
expenses totaled R$92.7 million, jeopardized by the following non-recurring
effects: (i) R$6.7 million from adjustments due to the transition to the CAN;
(ii) additional profit-sharing and
bonus provisions of R$5.0 million; (iii) additions to legal proceeding reserves
totaling R$1.2 million.
91
COSAN
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March 31st,
2010
EBITDA
As a result of all
the above, Cosan posted record EBITDA of R$1.7 billion in FY’10, 86.3% more than
its previous best of R$930million in FY’07. Of this total, CAA contributed R$1.4
billion, 106.5% up on the previous year, while CCL and Rumo contributed R$332.0
million and R$42.8 million, respectively. Even excluding the non-recurring
effects of REFIS (federal tax recovery program) and the sale of the aviation
fuel business, EBITDA maintained its historical level of R$1.4
billion.
|
4Q'09
|
4Q'10
|
EBITDA
|
FY'09
|
FY'10
|
|||||||||||
| 165.9 | 575.9 |
EBITDA
(R$MM)
|
718.0 | 1,733.1 | |||||||||||
| 7.1% | 13.1% |
Margin
|
11.5% | 11.3% | |||||||||||
| 121.9 | 477.7 |
● CAA
|
628.7 | 1,358.3 | |||||||||||
| 14.1% | 25.3% |
Margin
|
19.8% | 25.2% | |||||||||||
| 5.8 | 13.5 |
● Rumo
|
24.7 | 42.8 | |||||||||||
| 60.3% | 35.3% |
Margin
|
46.0% | 27.0% | |||||||||||
| 38.1 | 84.6 |
● CCL
|
64.5 | 332.0 | |||||||||||
| 2.5% | 3.3% |
Margin
|
2.1% | 3.3% | |||||||||||
CAA
Depreciation and
amortization totaled R$584.7 million, 43.1% more than the R$408.6 million
reported in FY’09, due to heavy investments in order to increase production
efficiency through agricultural mechanization, co-generation and industrial
improvements, as well as investments in increasing crushing capacity of the new
plants (greenfield units). If this non-cash effect is excluded from operating
costs and expenses, CAA recorded EBITDA of R$1.4 billion, chiefly due to the
following:
|
Þ
|
Adherence to
the REFIS program, which generated a positive impact of R$270.3 million,
as explained in section F
below;
|
|
Þ
|
Non-operating
revenue resulting from a capital gain of R$93.1 million due to the sale of
the aviation fuel business. In December 2008, Cosan S.A. acquired CCL
through its subsidiary Cosanpar Participações, which sold this division in
June 2009 for R$115.6 million. The difference between this amount and the
amount booked under property, plant and equipment related to the aviation
fuel business were recorded in the other operating income line, improving
the EBITDA, as detailed in previous Financial
Letters.
|
|
Þ
|
Non-operating
expenses of R$29.9 million from the merger of Teaçu Armazéns Gerais
S.A.
|
92
COSAN
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Management
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March 31st,
2010
Rumo
Rumo recorded
EBITDA of R$42.8 million in FY’10, showing an EBITDA margin of 27.0%.
It is
worth noting that the company recorded R$9.4 million in other operating income
from dispatch/demurrage, take or pay and storage services, and a non-recurring
non-operating expense of R$5.4 million from accounting adjustments arising from
the merger of Teaçú. The depreciation and amortization for the period were
R$14.2 million.
CCL
Excluding the
non-cash impact of depreciation of R$37.5 million, CCL posted FY’10 EBITDA of
R$332.0 million, with a margin of R$59/m3, or 3.3% EBITDA margin versus 2.1% for
the previous year, due to the upturn in diesel, ethanol and gasoline sales
volume, wider gasoline, diesel and lubricant unit margins, and the capture of
logistics synergies from the merger with CAA.
Financial
Result
The FY’10 net
financial result was a positive R$420.4 million, versus a negative R$817.4
million in the previous year, chiefly fueled by the impact of the exchange
variation on dollar-denominated debt, which was positive by R$559.0 million in
FY’10 and negative by R$573.7 million in FY’09.
The exchange impact
was in turn mainly due to the 37% appreciation of the U.S. dollar against the
Real in FY’09 (R$1.6872/US$ x R$2.3152/US$) and the contrary effect in FY’10,
when the dollar fell by 23.1% against the Real (R$2.3152/US$ x R$1.7810/US$).
The foreign-currency debt has also been increasing in recent years, having
closed FY’08, FY’09 and FY’10 at R$1.6 billion, R$2.3 billion and R$3.6 billion,
respectively.
Interest on the
gross debt totaled R$414.3 million, versus R$244.5 million in FY’09, chiefly due
to the upturn from the merger of NovAmérica, which was consolidated as of June
2009, and the funding for the acquisition of CCL, which impacted only four
months in FY’09.
|
4Q'09
|
4Q'10
|
Financial
Expenses, Net (R$MM)
|
FY'09
|
FY'10
|
||||||||||||
| (68.3 | ) | (101.5 | ) |
Interest on
Financial Debt
|
(244.5 | ) | (414.3 | ) | ||||||||
| 9.6 | 10.8 |
Financial
Investments Income
|
64.6 | 52.5 | ||||||||||||
| (58.7 | ) | (90.7 | ) |
(=)
Sub-total: Interest on Net Financial De
|
(179.9 | ) | (361.8 | ) | ||||||||
| 4.7 | (27.9 | ) |
Other
interest and monetary variation
|
(90.8 | ) | (116.6 | ) | |||||||||
| 5.2 | (70.0 | ) |
Exchange
Variation
|
(573.7 | ) | 559.0 | ||||||||||
| (125.4 | ) | 168.8 |
Gains
(losses) with Derivatives
|
47.7 | 330.9 | |||||||||||
| (19.1 | ) | 6.0 |
Others
|
(20.7 | ) | 8.8 | ||||||||||
| (193.4 | ) | (13.7 | ) |
(=)
Net Financial Expenses
|
(817.4 | ) | 420.4 | |||||||||
Sugar volume and
price positions with Trading companies and derivatives on March 31, 2009, as
well as foreign exchange hedge contracts to protect the Company’s future cash
flows are as follows:
93
COSAN
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Management
Report
March 31st,
2010
|
Summary
of Hedge* as of March 31, 2010:
|
Fiscal
Year
|
|||||||
| 2010/11 | 2011/12 | |||||||
|
Sugar
|
||||||||
|
NY#11
|
||||||||
|
Volume
(thd tons)
|
1,659.4 | 512.7 | ||||||
|
Average
Price (¢US$/lb)
|
20.3 | 17.9 | ||||||
|
London
#5
|
||||||||
|
Volume
(thd tons)
|
79.0 | - | ||||||
|
Average
Price (US$/ton)
|
622.1 | - | ||||||
|
FX
|
||||||||
|
US$
|
||||||||
|
Volume
(US$ million)
|
472.3 | 170.0 | ||||||
|
Average
Price (R$/US$)
|
1.99 | 2.03 | ||||||
Note: For sugar we
considerer written options once they are in the money as a hedge while for FX
derivatives we consider the Delta, regardless if in or out of the
money
EBITDAH
EBITDAH totaled
R$2.1 billion, versus R$1.7 billion for EBITDA before hedge operations. As can
be seen in the graph below, the net hedge result was a positive R$330.9 million,
versus a positive R$47.7 million in FY’09. FX derivatives generated a gain of
R$517.2 million, helping to mitigate the negative impact of the dollar
devaluation on revenue from dollar-denominated sales. Commodities derivatives
recorded a loss of R$186.2 million, versus a gain of R$64.0 million in FY’09,
reflecting the recovery of international sugar prices throughout most of
2010.
The table below
gives a breakdown of EBITDAH per business segment:
94
COSAN
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Report
March 31st,
2010
|
4Q'09
|
4Q'10
|
EBITDAH
|
FY'09
|
FY'10
|
||||||||||||
| 40.4 | 744.7 |
EBITDAH
(R$MM)
|
765.7 | 2,064.0 | ||||||||||||
| 1.8% | 16.3% |
Margin
|
12.1% | 13.2% | ||||||||||||
| (3.5 | ) | 646.6 |
● CAA
|
676.4 | 1,689.2 | |||||||||||
| -0.5% | 32.0% |
Margin
|
21.3% | 29.6% | ||||||||||||
| 24.7 | 13.5 |
● Rumo
|
24.7 | 41.8 | ||||||||||||
| - | 35.3% |
Margin
|
- | 26.6% | ||||||||||||
| 38.1 | 84.6 |
● CCL
|
64.5 | 332.0 | ||||||||||||
| 2.5% | 3.3% |
Margin
|
2.1% | 3.3% | ||||||||||||
Income
Tax
In this fiscal
year, Cosan S.A. income tax expenses amounted R$433 million out of which R$355
million were deferred. This result represented an effective tax rate of 30.7% on
earnings before taxes (compared to 34% of nominal rate), which reflects both
common permanent additions and exclusions and positive impact from specific
exclusions from the Tax Recovery Program, described below. In the previous year,
we had a positive impact of income tax (R$235 million) as result of losses
before taxes on that period and the resulting in deferred tax
credits.
Net
Income
Cosan posted FY’10
net income of R$986.5 million, versus a net loss of R$473.8 million the year
before, fueled by the positive impact of higher sales volume and prices on all
segments of the business, which pushed up the gross margin by R$1.3 billion, the
effect of the exchange variation on dollar-denominated debt and the benefits
from the Refis program.
95
COSAN
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March 31st,
2010
FINANCIAL
SITUATION
Cosan closed FY’09
with gross financial debt of R$5.3 billion (excluding Resolution 24711),
42% up on the R$3.7 billion recorded at the end of FY’09 and just 3.3% up
on the R$5.2 billion posted at the close of 3Q’10.
In November 2009,
the Company implemented several measures to improve its debt profile, including
full settlement of the promissory notes, the 209 senior notes, bank credit
certificates and debentures, the last two resulting from the acquisition of
NovAmérica and the contracting of: (i) US$ 430 million in export repayments,
maturing in 5 years; (ii) US$ 100 million in export credit notes (NCEs),
maturing in 3 years; (iii) R$ 300 million in export credit certificates (CCE),
maturing in 2 years; and (iv) the disbursement by the BNDES (Brazilian
Development Bank) of part of the funding for Jataí and Gasa.
In 4Q’10, the
Company opted to prepay financing of R$90 million with the IFC due to its high
cost, given that a portion is linked to the Group’s operating cash flow. In
addition, the BNDES disbursed R$123.4 million in new contracted loans and the
Company contracted additional FINAME funding of around R$100.0 million, for
machinery and equipment purchases. In the 4Q’10, a loan named “Proinfa” has been
reclassified to the BNDES line as well as for part of the FINAME loan amounting
to approximately R$40.0 million.
1 As disclosed in Note 13 to the financial statements, the
Resolution 2471 debt is pegged to Brazilian treasury certificates acquired by
the Company and recognized under current and non-current assets. Consequently,
this debt was excluded from the analysis of
indebtedness.
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2010
|
Debt
per Type (R$MM)
|
FY'09
|
3T'10
|
4Q'10
|
%
ST
|
Var.
|
|||||||||||||||
|
Foreign
Currency
|
2,334.9 | 3,415.8 | 3,622.5 | 206.6 | ||||||||||||||||
|
Perpetual
Notes
|
1,054.1 | 792.8 | 810.9 | 1.2 | % | 18.12 | ||||||||||||||
|
Senior Notes
2017
|
936.7 | 716.7 | 720.6 | 1.1 | % | 3.91 | ||||||||||||||
|
Senior Notes
2009
|
86.5 | - | - | 0.0 | % | - | ||||||||||||||
|
Senior Notes
2014
|
- | 632.3 | 631.2 | 1.2 | % | (1.01 | ) | |||||||||||||
|
IFC
|
114.3 | 90.9 | - | 0.0 | % | (90.94 | ) | |||||||||||||
|
FX
Advances
|
143.3 | 223.2 | 296.4 | 100.0 | % | 73.19 | ||||||||||||||
|
Pre-Export
Contracts
|
- | 960.0 | 980.5 | 20.5 | % | 20.51 | ||||||||||||||
|
Export Credit
Notes
|
- | - | 182.8 | 2.6 | % | 182.83 | ||||||||||||||
|
Local
Currency
|
1,420.1 | 1,749.0 | 1,711.4 | (37.69 | ) | |||||||||||||||
|
Promissory
Notes
|
1,162.0 | - | - | 0.0 | % | - | ||||||||||||||
|
BNDES
|
230.5 | 844.8 | 1,057.8 | 8.2 | % | 213.00 | ||||||||||||||
|
Finame
(BNDES)
|
44.7 | 156.1 | 201.1 | 16.0 | % | 45.02 | ||||||||||||||
|
Working
Capital
|
25.2 | 20.0 | 19.5 | 23.1 | % | (0.54 | ) | |||||||||||||
|
Overdraft
|
0.1 | 42.0 | 36.8 | 100.0 | % | (5.19 | ) | |||||||||||||
|
Credit
Banking Notes
|
- | 121.1 | - | 0.0 | % | (121.06 | ) | |||||||||||||
|
Credit
Notes
|
- | 510.5 | 378.7 | 20.8 | % | (131.75 | ) | |||||||||||||
|
CDCA
|
- | 60.2 | 61.4 | 51.2 | % | 1.26 | ||||||||||||||
|
PROINFA
|
- | 42.2 | - | 0.0 | % | (42.16 | ) | |||||||||||||
|
Expenses with
Placement of Debt
|
(42.4 | ) | (47.7 | ) | (44.0 | ) | 35.6 | % | 3.73 | |||||||||||
|
Gross
Debt
|
3,755.0 | 5,164.9 | 5,333.8 | 14.9 | % | 168.92 | ||||||||||||||
|
Cash and
Marketable Securities
|
719.4 | 864.1 | 1,078.4 | 214.29 | ||||||||||||||||
|
Net
Debt
|
3,035.6 | 4,300.8 | 4,255.4 | (45.37 | ) | |||||||||||||||
Cosan ended the
year with a cash position of R$1.1 billion, reducing net debt to R$4.3 billion,
or 2.4 times EBITDA in the last 12 months. This EBITDA is calculated using CAA
and CCL’s last 12 month EBITDA and NovAmérica’s annualized last 10 month
EBITDA.
INVESTMENTS
Cosan’s investment
flows totaled R$1.8 billion in FY’10, totaling capex of R$1.9 billion, chiefly
in greenfield projects, co-generation projects, planting and inter-harvest
maintenance, less R$115.5 million from the sale of the aviation fuel
business.
Consolidated capex
was 43.1% higher than in the previous year, mainly due to the inclusion of
NovAmérica’s assets, investments of R$143.8 million by Rumo, the return of
planting costs to historical levels and the inclusion of CCL for the entire
year, versus only four months in FY’09.
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|
4Q'09
|
4Q'10
|
Capex
(R$MM)
|
FY'09
|
FY'10
|
||||||||||||
| 167.2 | 307.8 |
CAA
- Capex Operacional
|
553.7 | 722.5 | ||||||||||||
| 22.0 | 47.3 |
● Sugar
Cane Planting Costs
|
118.9 | 211.9 | ||||||||||||
| 84.3 | 197.7 |
● Inter-harvest
Maintenance Costs
|
144.4 | 260.9 | ||||||||||||
| * | 22.3 |
● SSHE
& Sustaining
|
* | 45.0 | ||||||||||||
| * | 30.5 |
● Mechanization
|
* | 30.5 | ||||||||||||
| 61.0 | 10.1 |
● Projects
CAA
|
290.4 | 174.2 | ||||||||||||
| 160.9 | 245.7 |
Operating
Capex - CAA
|
781.2 | 972.0 | ||||||||||||
| 53.4 | 112.0 |
● Co-generation
Projects
|
325.8 | 376.4 | ||||||||||||
| 107.5 | 46.1 |
● Greenfield
|
455.4 | 462.2 | ||||||||||||
| * | 87.5 |
● Expansion
|
* | 133.4 | ||||||||||||
| 328.1 | 553.5 |
Capex
- CAA
|
1,334.8 | 1,694.5 | ||||||||||||
| 6.4 | 48.1 |
CCL
|
11.3 | 87.8 | ||||||||||||
| - | 143.8 |
Rumo
|
- | 143.8 | ||||||||||||
| 334.6 | 745.4 |
(=)
Capex - Consolidated Cosan
|
1,346.1 | 1,926.1 | ||||||||||||
| 227.7 | 30.7 |
● Investments
|
1,823.6 | 16.0 | ||||||||||||
| (372.1 | ) | (5.3 | ) |
● Cash
received on Sale of Fixed Assets
|
(372.1 | ) | (126.2 | ) | ||||||||
| 190.3 | 770.8 |
(=)
Investment Cash Flow
|
2,797.6 | 1,815.9 | ||||||||||||
*
FY’09 figures unavailable, investments previously included in the Projects CAA
line
CAA
In FY’10, the
Company’s planting investments totaled R$211.9 million, representing a return to
historical levels. Planted area came to 53,600 hectares, versus 28,100 hectares
in FY’09. Land preparation in as yet unplanted areas is also included in this
line.
Inter-harvest
maintenance investments totaled R$260.9 million, chiefly due to the addition of
the NovAmérica units and the impact of the shorter inter-harvest period, which
increased the need for third-party services.
As of this quarter,
investments in “Health, safety and the environment & prevention”, which came
to R$45.0 million in FY’10, will be recognized separately in order to highlight
those investments in our
units designed to generate gains in efficiency.
The company
invested R$30.5 million in mechanization, giving a mechanization ratio of
64.5%.
Various CAA
projects absorbed R$174.2 million, mainly consisting of investments in the
industrial and agricultural areas, aiming to increase the productivity and
efficiency of the company’s units.
Electricity
co-generation investments amounted to R$376.4 million, 15% up on the year
before, reflecting the conclusion of certain projects (Copi, Gasa and Rafard),
the operational start-up of two major projects (Barra and Bonfim) and the
beginning of works in other plants.
Greenfield capex
totaled R$462.2 million, associated with the concluding phase of the Jataí (GO)
and Caarapó (MS) projects.
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Expansion projects
absorbed R$133.4 million, related to the expansion of the Costa Pinto, Gasa,
Bonfim, Barra, Tamoio, Ipaussu and Junqueira sugar plants, increasing the
company’s production capacity by approximately 400,000 tones per
year.
In
June 2009, the Company concluded the acquisition of NovAmérica (for more
details, see section G – Material Facts).
Rumo
Rumo began
investing in locomotives and rolling stock in 4Q’10, totaling R$143.8 million in
FY’10. The company received a BNDES financing line to acquire these
assets.
CCL
CCL invested R$87.8
million in improvements to service stations, terminal expansions and
renovations. The R$76 million increase over FY’09 was mainly due to the
inclusion of a full year of the company’s investments for the first time in
FY’10.
Effects
of the Tax Recovery Program (“Refis”)
The Company entered
in the Tax Recovery Program set by the Brazilian Government in accordance with
law No. 11.941/09 and Provisional Measure MP 470/09. In the scope of these
programs, Cosan had deductions in tax liabilities contingent, mainly related to
recovery of taxes and federal contributions with premium IPI credit and IPI
credit on purchases of raw material and inputs with zero tax rate, exempt and
not exempt, which generated a benefit in the FY’10, recognized under Other
Operating Revenues, in the amount of R$ 270.3 million. Additionally, this
program also enabled the company to use income tax losses credits in the amount
of approximately R$ 204 million, to reduce tax obligations that were previously
being the subject contest of dispute by the Company. This last benefit, in spite
of not impacting the result under the accounting point of view, benefited
the
Company in the sense that the mentioned tax credits are used only as the Company
presents profit according to tax criteria, and is limited to 30% compensation in
each annual period.
RETAINED
EARNINGS PROPOSAL
It will be
proposed, at Cosan S.A. General Shareholders’ Meeting that will take place on
July 30th,
2010, that Retained Earnings amount R$266.3 million, being partially designated
for the Company’s annual investment program, established on the FY’11 Budget
that will also be analyzed and approved at above mentioned General Shareholders
Meeting.
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RESEARCH
AND DEVELOPMENT
In 2002 we
established a partnership with the University of Campinas – UNICAMP to develop a
system of geographical information, aiming at improvement of the monitoring of
our crops. Through this partnership we have developed a tool that monitors the
sugar cane crops using satellite images. The system provides subsidy for
conduction of more precise production estimates, in addition to generating
extremely detailed information concerning the general conditions of our cane
fields, which gives us the opportunity of enhancing the procedures for
management of agricultural cultures. Presently we monitor all of the land areas
where we produce sugarcane, whether on our own land or on leased areas or
suppliers’ areas.
We have established
service agreements with the following technological institutes for development
of new varieties of sugarcane: Centro de Tecnologia Canavieira
(Sugarcane Technology Center), or CTC, of which we are the majority
shareholder; Federal University of São Carlos – UFSCAR and Instituto Agronômico de Pesquisa
(Agronomics Research Institute), or IAC. The CTC is a private institution
intended for research and development of new technologies for agricultural,
logistics and industrial activities, as well as for creation of new varieties of
sugarcane. The CTC developed the biodegradable plastic (PHB) and biological
alternatives for control of plagues. Furthermore, it created the VVHP sugar
(with extremely high polarization), which requires less energy to be processed,
and also developed the co-generation technology. We analyze the best forms for
possible use of our varieties of sugarcane in view of the different soil and
climatic conditions of the five main regions of the State of São
Paulo.
We have maintained
an agreement with CanaVialis S.A. (“CanaVialis”) since June 2006, to provide to
Cosan a program of genetic enhancement of sugarcane specifically developed for
our mills. The Company has been obtaining benefits from its support service and
from the use of its bio-plant, which allows us to reduce the time that is
necessary for production of seedlings and provides for us access to new and
improved varieties of sugarcane by means of its genetic enhancement program. In
2006 CanaVialis implemented an experimental station at our Destivale unit, which
conducts tests of new species of
sugarcane specially selected for Cosan’s production structure.
We analyze and
develop, together with our suppliers and partners, different types of input,
machinery and agricultural implements used to facilitate and improve the
cultivation of sugarcane, considering also the different conditions of our soil.
We share this technology with sugarcane suppliers so that they can obtain better
sugarcane yields and quality.
In December 2009
the partnership between Cosan and Amyris was announced, which aims at
implementation of Amyris technology in one of the mills of the group for
production of biofuels with high added value. With an investment of up to R$50
million, in addition to producing sugar and ethanol the unit will be also able
to produce farnasene, a chemical component that results from fermentation of
sugarcane syrup with yeasts. The partnership is still in a phase of study of the
implementation and obtainment of capital for investment.
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For Cosan, the
development of new sources of renewable energy, such as the biofuels, is
strategic, and this work with Amyris is part of this context.
PROTECTION
OF THE ENVIRONMENT
Oriented by
principles of eco-efficiency, the operations of the Cosan Group are regulated by
environmental licenses issued by the various pertinent authorities of the States
in which we are present. Our units seek to develop and implement management
systems that are recognized worldwide.
Either together
with government agencies or in a segregated form, the Company conducts a number
of actions with a positive impact on the ecosystem of the communities of its
area of influence. Among these actions are the reforesting of ciliar vegetation,
ichthyologic repopulation of rivers, recovery of water springs, programs for
forest firefighting, implementation of green belts around the industrial units,
environmental, landscaping and urbanism recovery of rivers, as well as projects
for recovery of hydrographic basins. Cosan’s environmental policy has sought to
always observe the following principles: (i) environmental management as a
priority and determinant factor for conduction of sustainable development; (ii)
continual adjustment to applicable environmental legislation; (iii) adoption of
recommendations that result from environmental preservation technical/scientific
advancements; and, (iv) use of resources in a way that can assure integration
and equilibrium between environmental protection and agricultural/industrial
development.
Following its
policy, jointly with another three partners Cosan announced the conduction in
June/08 of the first international shipment of ethanol with a
socio-environmental seal and with verification of important sustainability
criteria. The transaction, shipment of which had Sweden as its destination, is
the result of a pioneering agreement executed between Cosan and other ethanol
producers with Swedish corporation Sekab, the most important buyer of Brazilian
ethanol in Europe. The agreement is an initiative of the companies involved in
the transaction, aimed at taking the first step in a process of continual
improvement, with the purpose of serving one of the most demanding consumers in
the world. It is important to stress that the mills were able to meet the
requirements of the European consumer without altering their current operating
practices.
The major
innovation of this agreement is the formal establishment of a process of
certification by means of an international and independent company, which will
conduct auditing at all of the production units twice-a-year, in order to verify
compliance with the following established criteria: (i) reduction of emission of
carbon dioxide; (ii) minimum levels of harvest mechanization; (iii) commitment
to preservation of the areas of native forest; (iv) zero tolerance for child and
non-regulated labor; (v) observance of the minimum
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wages of the
sector; and (vi) adhesion to and compliance with the targets established by the
Agro-Environmental Protocol.
In this way, the
companies show evidence of compliance with labor laws, respect for environmental
norms and also strengthen their commitment to adjustment to the rules of the
Agro-Environmental Protocol, executed with the State of São Paulo and
stipulating the end of the practice of burning the crops until
2014.
As regards Cosan
CL, we will be proceeding with all of the projects related to the environment,
among which, are highlighted (i) the Esso-Mamirauá Program for Environmental
Education in the Central Amazon Region; (ii) the OndAzul Foundation, which is
dedicated to preservation of aquatic ecosystems, and (iii) the PiraCena Project,
which aims at study and recovery of the Piracicaba River Basin, in São Paulo.
Cosan CL, which has always been committed to maintaining high standards of
safety, healthy and care with the environment, maintaining awareness of the
importance of managing the businesses with the purpose of preventing incidents
and controlling spillage and loss of fuels, as well as of rapid and efficient
response to incidents resulting from operations, cooperating with the industrial
organizations and with the authorized government agencies.
HUMAN
RESOURCES
On March 31, 2010,
with inclusion of the employees of our controlled subsidiaries (except for CCL),
we had 38,573 employees and 34 interns. All of our employees, including migrant
and temporary rural workers are hired directly by the Company under the CLT
(Brazilian Consolidated Labor Laws) system.
Controlled
subsidiary Cosan CL has on its workforce approximately 826 employees and 88
interns, who are assigned principally in the cities of Rio de Janeiro and
Curitiba, likewise hired under the CLT system.
The Company
maintains harmonious relationships with the Workers’ Unions that represent its
employees, of which approximately 30% of the employees are members. The
collective bargaining agreements to which we are parties or that we negotiate
directly normally have duration of 12 months. The Company ensures compliance
with applicable labor legislation, in addition to strict observance of the
conditions covenanted in the collective bargaining instruments executed with the
unions, applying them equally to unionized and non-unionized
employees.
Furthermore, as
mentioned in the previous topic, the Company has reiterated its commitment
established with a Swedish company, in which it committed to maintaining full
observance of labor laws, particularly zero tolerance for child labor and for
degrading
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working conditions.
This commitment has always permeated Cosan’s conduct and has been fully observed
the Company.
We offer for our
employees, including our executives, benefit packages that include balanced
meals, medical, hospital and dental plan, subsidy for acquisition of
medications, food basket or meal vouchers, group life insurance, scholarships,
among others, which are applicable to its different internal publics. All of our
employees are eligible for the profit sharing programs, which are customized by
area of activity and developed in accordance with applicable legislation, with
the participation of workers’ committees and representatives of the professional
unions, the remuneration for which is based on accomplishment of operating
targets and performance. The members of our Board of Directors are not entitled
to such benefits.
In the last fiscal
year we had results that were relevantly positive in matters concerning
Occupational Safety and Health. The corporate team was restructured and began to
rely on specialists in the areas of Management, Hygiene, Ergonomics and
Emergency Control Systems. This year projects were developed that contributed to
a reduction of more than 20% of the TF – Frequency Rate for lost-time accidents,
when compared with the previous fiscal year. Among the projects implemented we
highlight: (i) the PROEX – Programs for Behavioral Excellence, (ii) the Skills
Development for Investigation and Analysis of Accidents and of Occupational
Hygiene, and (iii) the Safety Audit in the Agricultural and Industrial areas and
the 5 Ss Program.
The company
consolidated its professional skills development programs, with strong activity
and investments in structured programs for development of managers, leaders and
engineers, through an internal MBA and skills development training for
professionals of the technical and production areas. In the last year the bases
were structured for a solid career and succession plans in the Company, in
addition to continuity of the performance and competencies appraisal programs,
based on the meritocracy method.
CORPORATE
RESTRUCTURING AND NEW BUSINESS
During the fiscal
year ended on March 31, 2010, the principal corporate transactions carried out
by the Company were:
a. Novo Rumo Logística
S.A.
According to the
shareholders agreement executed on April 9, 2008, harbor concessions and assets
for export of sugar of the Company and of Rezende Barbosa S.A. Administração e
Participações (“Rezende Barbosa”) were concentrated in Novo Rumo Logística S.A.
(“Novo Rumo”), which is indirectly controlled by the Company.
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On
April 10, 2009 the Company and Rezende Barbosa, which is controller of Nova
América, provided for integration of the Cosan and Teaçu Armazéns Gerais S.A.
(“Teaçu”) port terminals, which until then had been controlled by Rezende
Barbosa. As a result of its transaction, which involved payment of R$121,331
million and issuance of shares of Novo Rumo, the Company acquired 100% of Teaçu,
thereby indirectly holding 64.06% of Novo Rumo, with 28.82% remaining in
possession of Rezende Barbosa.
b. Curupay Participações
S.A.
On
June 18, 2009 the shareholders of the Company approved in an Annual
Shareholders’ Meeting the acquisition of Curupay S.A. Participações (“Curupay”),
formerly controlled by Rezende Barbosa, through e issuance of 44,300,389 common
shares, with equity value of R$334,172 million, the market value of which on
that date was R$624,192 million.
As
from such date, the Company absorbed in its net equity the investment of
Curupay, represented (i) 28.82% of participation in Novo Rumo, (ii) 100% of
direct participation in Nova América S.A. Trading, and (iii) 100% of direct and
indirect participation in Cosan Alimentos S.A. (“Cosan Alimentos”, formerly
named Nova América S.A. - Agroenergia) and relevant subsidiaries. As a result of
this transaction, the Company raised its direct and indirect participation in
Novo Rumo to 92.9%.
On
November 18, 2009 Cosan Alimentos absorbed Nova América S.A.
Trading.
c. Sale of the aviation fuels
business to Shell do Brasil Ltda.
On
June 17, 2009 subsidiary Cosanpar sold to Shell the assets of the aviation fuel
business, for the amount of R$115,601 million.
d. TEAS Terminal
Exportador de Álcool de Santos (Santos Ethanol Exporting
Terminal) (“TEAS”)
On
November 24, 2009 the Company acquired 10,527,295 common shares issued by TEAS,
for the total amount of R$20,002 million, increasing its equity participation by
more than 26.67%, thereby detaining 66.67% of the total and voting capital stock
of the mentioned company.
e. Logispot Armazéns Gerais
S.A. (“Logispot”)
On
November 12, 2009, through its subsidiary Rumo Logística S.A. (“Rumo”), Cosan
acquired 166,590 common shares issued by Logispot, equivalent to 14.28% of the
capital stock of that company.
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f. Joint Venture with
Shell
In February 2010
the Company executed a non-binding memorandum of understanding, valid for 180
days, with Shell International Petroleum Company Ltd. ("Shell"), by which they
plan to create a joint venture involving the sugar, ethanol and fuel
distribution assets of the Company and the fuel distribution assets of Shell in
Brazil. Formalization of this agreement is subject to fulfillment of certain
conditions and conclusion of the negotiations.
PERSPECTIVES
The new fiscal year
promises to be one of major challenges for all of the Cosan business units. The
joint venture with Shell must have its negotiations completed and its terms
approved by the regulating agencies. Rumo Logística has an ambitious plan of
conduction of investments, while the co-generation of energy is expected to have
10 units producing and delivering energy.
During this year
the fuels distribution sector will have a major opportunity for growth and for
obtainment of important synergies through the joint venture with Shell. Once the
joint venture is approved, a number of measures related to integration of the
assets and consequent corporate restructuring will be necessary. The joint
venture will permit obtaining volume gains that, together with the logistics and
administrative operating synergies, will create all of the opportunities for the
new company to become the most efficient in the sector.
Rumo Logística has
declared that as from January 2010 the agreements with ALL became valid and
enforceable in all of their covenanted terms and conditions. Thus, the
investments plan of approximately R$1,2 billion will continued to be implemented
so as to increase the capacity of rail transport of bulk sugar and its
sub-products, from the present 2 million tons to approximately 11 million by
2013, securing new customers, motivating them to migrate from highway
transportation to the railway modal, which is more efficient, economical and
integrated with the port services.
In the area of
trading energy from sugarcane bagasse (co-generation) we will have major
advancements with the start-up of new production units (Barra, Bonfim, Jataí and
Caarapó), which during this harvest will start trading surplus energy, so as to
perform their contractual obligations established by means of prices negotiated
in the energy auctions that have been held.
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The sugar and
ethanol segment will continue to offer major opportunities for growth and
consolidation, mainly from the prices cycle of the sugar commodity, which is
entering a worldwide surplus phase, after 2 consecutive years of deficit.
Furthermore, this year, after execution of the joint venture with Shell, we will
be well capitalized and with low leverage in order to select the best deals in
the M&A market, contributing to increased consolidation of the sector. In
addition, the processes of continual enhancement and the quest for efficiencies
in our production costs, in the existing and acquired units, will continue to
guide us.
For all of this, we
expect this year to take an important step towards our mission of offering
increasingly cleaner energy for peoples’ lives, without losing our focus on
being a world benchmark in terms of clean and renewable energy.
INVESTORS
RELATIONS
Cosan is a
publicly-held joint stock company. On March 31, 2010 capital stock was
represented by 406,560,317 common registered book-entry shares (328,284,884 on
March 31, 2009), with no par value.
The Company
conducted its initial shares offering in the São Paulo Stock Exchange (BOVESPA)
in November 2005, listed under the principal level of corporate governance of
the BOVESPA, the Novo
Mercado (New Market). The Company’s controller, Cosan Limited, conducted
its initial shares offering in the New York Stock Exchange (NYSE) in August
2007. The Cosan Group is a pioneer in the sugar and ethanol sector, having
become the first Brazilian group to go public in Brazil and in the United States
of America.
The Company’s
relationship with the financial community and with the investors stands out for
its disclosure of information with transparency and characterized by its respect
for legal and ethical principles. The Investors Relations area maintains
contacts with investors and market analysts, sponsoring events for disclosure of
information concerning the Company’s performance. Cosan also maintains a site
for relationship with investors that contains information that is always
updated, specific, segmented and aimed at distinct publics: analysts,
institutional investors and individual investors.
CORPORATE
GOVERNANCE
Cosan conducts its
operations following best corporate governance practices. The Company is listed
in the principal level of Corporate Governance of the Bovespa, known as the Novo
Mercado, since it launched its shares in the Brazilian stock market in
2005,
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and is bound by the
arbitration rules of the Câmara de Arbitragem do
Mercado (Chamber of Arbitration of the Market), in accordance with the
Commitment Clause of its By-Laws.
In order to ensure
transparency of management and of its businesses, for the benefit of
shareholders and investors, the Company relies on a policy of disclosure of
information that establishes rules and procedures for persons who are linked to
the Company (executives and employees) who have access to relevant information
and facts, and defines the criteria, the moment and the party responsible for
disclosure of such information to the investors, in order to assure that the
data for the market are distributed in an ample, transparent and homogenous
form.
The Company’s
equity controller was the first Foreign Private Investor (FPI) in the sector
that it operates to be listed on the New York Stock Exchange. In this way, the
Company implemented the internal controls procedures with the aim of adapting to
the requirements of Section 404 of the Sarbanes-Oxley Law (SOX), based on the
methodology established by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) for internal controls. The Company adjusted to
Section 302 of the same Law, which determines that executive officers must
represent that they are responsible for the controls and procedures for
disclosure of information. The Company has been continually enhancing its
internal processes and ratifying its commitment to better Corporate Governance
practices.
Board of Directors – Our board
of directors is the body that takes the decisions and is responsible for, among
other incumbencies, establishing the general guidelines and policies of our
business. Our board of directors is also responsible for supervision of our
executive board and for monitoring implementation by the executive officers of
the policies and guidelines that are established from time to time by the board
of directors. The Cosan Board of Directors consists of nine members, of whom
three are independent. On August 29, 2008 the members of the Board of Directors
of the Company were reelected in an Annual Shareholders’ Meeting for a new term
of office.
Fiscal Council – Instituted
and elected on August 30, 2007, it consists of three regular members, all of
whom have an annual term of office. Integrated with the transparency and
corporate governance policy, the Fiscal Council meets every quarter to monitor
the administrative acts and to analyze the Company’s financial
statements.
Executive Board – Acts as an
executive body. The Executive Officers are responsible for internal
organization, daily transactions and implementation of the general policies and
guidelines established from time to time by our board of directors. Responsible
for direct management of the businesses, it consists of a president and chief
executive officer, three executive vice-presidents and three executive officers,
who are elected by the Board of
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Directors for a
term of office of two years, which can be extended until investiture of the
members to be elected subsequently.
Risk Management Committee -
Our risk management committee comprises three members of the Board, one of them
independent, which meets at least annually to discuss and determine the
Company's hedge policy. Members of our risk management committee are Mr. José
Alexandre Scheinkman (Chairman), Marcelo Eduardo Martins and Marcos Marinho
Lutz. Additionally, we have also established an Executive Committee of Risks,
formed by a member of the Board and several executives of the Company. The
Executive Committee meets weekly to analyze the behavior of the exchange and
commodity markets, to discuss the positions of hedging and pricing strategy for
the sugar’s export, to reduce the adverse effects of changes in sugar prices and
the exchange rate as well as monitoring the liquidity and counterparty (credit)
risks. Our policy is to hedge the cash flow’s exposure to the risks described
above mainly by means of natural hedge. For exposures that can not be considered
as natural hedge, we use derivative financial instruments, including futures
contracts, swaps and options in OTC markets, stock exchanges or financial
institutions with high ratings.
Audit Committee – Cosan
Limited Board of Directors decided that Marcus Vinicius Pratini de Moraes
(Chairman of the Board) and Mailson Ferreira da Nóbrega are the “financial
specialists of the audit committee”, as defined in the current rules of the SEC,
fulfilling the requirements of independence of the SEC and the listing standards
of the NYSE. To obtain more information about our audit committee, see “Item 6C.
Board Practices - Audit Committee”. The members of our audit committee are
Messrs. Marcus Vicinius Pratini de Moraes (Chairman), Mailson Ferreira da
Nóbrega and Hélio França.
Compensation Committee – We have
a compensation committee that is responsible for reviewing and approving the
remuneration and benefits granted to our executive officers and to the key
members of our management, making recommendations to the Board in relation to
matters relative to compensation and to granting to our executive officers and
other employees remuneration based on shares, according to our stock incentives
plan. The committee is also responsible for analyzing the terms of the plan, for
altering it and for taking any other measures that may be necessary to manage it
in our best interest. The members of our compensation committee are Messrs.
Pedro Isamu Mizutani (Chairman), Marcus Vinicius Pratini de Moraes and Marcelo
de Souza Scarcela Portela.
RELATIONSHIP
WITH OUTSIDE AUDITORS
The Company’s
policy for contracting with the independent auditors services that are not
related to outside auditing is based on the principles that preserve their
independence. According to internationally accepted standards, these principles
are that: (a) the auditor must not audit his/her own work; (b) the auditor must
not perform in a position of
108
COSAN
LIMITED
Management
Report
March 31st,
2010
management with
his/her client, and (c) the auditor must not legally represent the interests of
his/her clients.
In compliance with
CVM Instruction No. 381/03, we inform that the other services contracted with
our independent auditors – Ernst & Young Auditores Independentes S.S. and
their related parties, during the current fiscal year, were related to review of
the internal controls, review of the sustainability report and other services
related to auditing work and that had no implication for the principle of
independence described in the above paragraph.
APPRECIATION
The Management of
Cosan S.A. Indústria e Comércio is thankful to its shareholders, customers,
suppliers and financial institutions for their collaboration and trust, and most
specially to its employees for their dedication and applied
efforts.
Management.
* * * *
*
STATEMENT FROM
OFFICERS
Under the terms of
article 25, 1st
paragraph, 5th and
6th
items of Instruction CVM nr 480/09, the Executive Body declares that reviewed,
discussed and agreed with the Financial Statements from the fiscal year 2010,
ended on March 31st,
2010. The Body also reviewed, discussed and agreed with the Report of
Independent Auditors issued on June 10th,
2010, by Ernst & Young Auditores Independentes S.S., CRC
2SP015199/O-6.
* * * *
*
109
|
Financial
Statements
|
|
Cosan S.A. Indústria e
Comércio
|
|
March 31,
2010 and 2009
|
|
with Report
of Independent Auditors
|
|
“A
free translation into English of the original issued in
Portuguese”
|
COSAN S.A. INDÚSTRIA E COMÉRCIO
FINANCIAL
STATEMENTS
March 31, 2010 and
2009
Table of
contents
|
Report of
Independent Auditors
|
1
|
|
Audited
financial statements
|
|
|
Balance
sheets
|
2
|
|
Statements of
Operations
|
4
|
|
Statement of
changes in shareholders’ equity
|
5
|
|
Statements of
cash flows
|
6
|
|
Statements of
value added
|
8
|
|
Notes to the
financial statements
|
9
|
A
free translation from Portuguese into English of the Report of Independent
Auditors on the Financial Statements prepared in Brazilian currency in
accordance with the accounting practices adopted in Brazil
Report
of Independent Auditors
To
the Management and Shareholders of
Cosan
S.A. Indústria e Comércio
We
have audited the balance sheets (parent company and consolidated) of Cosan S.A.
Indústria e Comércio and subsidiaries as of March 31, 2010 and 2009, and the
related statetement of operations, changes in shareholders’ equity, cash flows
and value added for the year ended March 31, 2010 and the eleven month period
ended March 31, 2009, prepared under the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements.
We
conducted our audits in accordance with the applicable audit standards in Brazil
and included: a) the planning of works, considering the materiality of balances,
volume of transactions and the accounting system and internal controls of the
Company and its subsidiaries; b) the verification, based on tests, of the
evidences and records supporting the amounts and accounting information
disclosed; and c) the assessment of the most relevant accounting practices and
estimates adopted by the management of the Company and its subsidiaries, as well
as the presentation of the financial statements as a whole.
In
our opinion, the financial statements represent fairly, in all material
respects, the financial position of Cosan S.A. Indústria e Comércio and
subsidiaries (parent company and consolidated) as of March 31, 2010 and 2009,
the results of its operations, changes in shareholders’ equity, cash flows and
value added of operations for the year ended March 31, 2010 and the eleven month
period ended March 31, 2009, in accordance with the accounting practices adopted
in Brazil.
São Paulo, June 10,
2010.
ERNST &
YOUNG
Auditores
Independentes S.S.
CRC
2SP015199/O-6
|
Luiz Carlos
Nannini
|
Antonio C. M.
Lage
|
|
Accountant
CRC 1SP171638/O-7
|
Accountant
CRC 1MG077995/O-1-S-SP
|
1
A
free translation from Portuguese into English of the financial statements
prepared in Brazilian currency in accordance with accounting practices adopted
in Brazil
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Balance
sheets
March 31, 2010 and
2009
(In thousands of
reais)
|
Parent
Company
|
Consolidated
|
||||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
||||||||||||||
|
Assets
|
|||||||||||||||||
|
Current
assets
|
|||||||||||||||||
|
Cash and cash
equivalents
|
Note 4
|
285,925 | 388,726 | 1,078,366 | 719,356 | ||||||||||||
|
Restricted
cash
|
44,972 | 11,757 | 44,972 | 11,757 | |||||||||||||
|
Trade
accounts receivable
|
Note 5
|
224,961 | 112,415 | 766,415 | 599,163 | ||||||||||||
|
Derivative
financial instruments
|
Note
20
|
238,024 | 17,022 | 230,561 | 17,022 | ||||||||||||
|
Inventories
|
Note 6
|
255,643 | 341,490 | 1,046,730 | 1,106,185 | ||||||||||||
|
Advances to
suppliers
|
69,480 | 74,520 | 235,552 | 206,032 | |||||||||||||
|
Related
parties
|
Note 7
|
429,223 | 196,319 | 24,859 | 57,232 | ||||||||||||
|
Deferred
income and social contribution taxes
|
Note
12.b
|
12,680 | - | 76,310 | 42,471 | ||||||||||||
|
Recoverable
taxes
|
115,321 | 89,763 | 327,864 | 265,417 | |||||||||||||
|
Other
assets
|
9,369 | 11,285 | 61,166 | 50,279 | |||||||||||||
| 1,685,598 | 1,243,297 | 3,892,795 | 3,074,914 | ||||||||||||||
|
Noncurrent
assets
|
|||||||||||||||||
|
Long-term
receivables
|
|||||||||||||||||
|
Accounts
receivable from federal government
|
Note
15
|
- | - | 333,733 | 323,433 | ||||||||||||
|
CTNs-Restricted
Brazilian Treasury Bills
|
Note
13
|
31,234 | 27,356 | 205,657 | 177,626 | ||||||||||||
|
Deferred
income and social contribution taxes
|
Note
12.b
|
150,226 | 236,710 | 560,114 | 700,044 | ||||||||||||
|
Advances to
suppliers
|
4,635 | 3,800 | 63,741 | 48,035 | |||||||||||||
|
Related
parties
|
Note 7
|
22,160 | - | 81,411 | - | ||||||||||||
|
Recoverable
Taxes
|
2,666 | 4,207 | 45,018 | 21,374 | |||||||||||||
|
Other
assets
|
1,712 | 1,219 | 166,823 | 111,058 | |||||||||||||
|
Permanent
assets
|
|||||||||||||||||
|
Investments
|
Note 8
|
6,125,151 | 4,788,932 | 193,123 | 278,209 | ||||||||||||
|
Property,
plant and equipment
|
Note 9
|
872,122 | 789,259 | 5,561,065 | 3,465,236 | ||||||||||||
|
Intangible
assets
|
Note
10
|
399,648 | 403,918 | 2,901,308 | 2,447,464 | ||||||||||||
| 7,609,554 | 6,255,401 | 10,111,993 | 7,572,479 | ||||||||||||||
|
Total
assets
|
9,295,152 | 7,498,698 | 14,004,788 | 10,647,393 | |||||||||||||
2
|
Parent
Company
|
Consolidated
|
||||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
||||||||||||||
|
Liabilities
|
|||||||||||||||||
|
Current
liabilities
|
|||||||||||||||||
|
Loans and
financing
|
Note
13
|
500,142 | 1,419,451 | 800,902 | 1,449,504 | ||||||||||||
|
Derivative
financial instruments
|
Note
20
|
76,703 | 66,895 | 76,703 | 66,895 | ||||||||||||
|
Trade
accounts payable
|
116,363 | 92,874 | 569,399 | 456,116 | |||||||||||||
|
Salaries
payable
|
48,759 | 29,713 | 141,584 | 93,156 | |||||||||||||
|
Taxes and
social contributions payable
|
Note
11
|
42,633 | 36,076 | 215,862 | 168,596 | ||||||||||||
|
Dividends payable
|
Note
16.b
|
116,569 | - | 116,569 | - | ||||||||||||
|
Related
parties
|
Note 7
|
92,818 | 26,801 | 14,416 | 5,169 | ||||||||||||
|
Other
liabilities
|
68,047 | 39,203 | 182,434 | 85,794 | |||||||||||||
| 1,062,034 | 1,711,013 | 2,117,869 | 2,325,230 | ||||||||||||||
|
Noncurrent
liabilities
|
|||||||||||||||||
|
Loans and
financing
|
Note
13
|
1,740,779 | 1,237,766 | 5,136,529 | 2,885,456 | ||||||||||||
|
Taxes and
social contributions payable
|
Note
11
|
87,645 | 55,410 | 593,505 | 328,760 | ||||||||||||
|
Provision for
judicial demands
|
Note
14
|
71,556 | 236,633 | 444,421 | 1,105,899 | ||||||||||||
|
Related
parties
|
Note 7
|
967,974 | 853,151 | - | 405,160 | ||||||||||||
|
Actuarial
liability
|
Note
24
|
- | - | 61,788 | 60,378 | ||||||||||||
|
Deferred
income and social contribution taxes
|
Note
12.b
|
220,697 | - | 346,599 | - | ||||||||||||
|
Other
liabilities
|
34,711 | 38,978 | 146,496 | 139,884 | |||||||||||||
| 3,123,362 | 2,421,938 | 6,729,338 | 4,925,537 | ||||||||||||||
|
Minority
shareholders’ interest
|
- | - | 47,825 | 30,879 | |||||||||||||
|
Shareholders’
equity
|
Note
16
|
||||||||||||||||
|
Capital
|
4,687,826 | 3,819,770 | 4,687,826 | 3,819,770 | |||||||||||||
|
Capital
reserves
|
50,626 | 41,655 | 50,626 | 41,655 | |||||||||||||
|
Income
reserves
|
374,248 | - | 374,248 | - | |||||||||||||
|
Other
comprehensive income
|
(2,944 | ) | - | (2,944 | ) | - | |||||||||||
|
Accumulated
losses
|
- | (495,678 | ) | - | (495,678 | ) | |||||||||||
| 5,109,756 | 3,365,747 | 5,109,756 | 3,365,747 | ||||||||||||||
|
Total
liabilities and shareholders’ equity
|
9,295,152 | 7,498,698 | 14,004,788 | 10,647,393 | |||||||||||||
The notes are an
integral part of the financial statements.
3
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Statement of
income
Years ended March
31, 2010 and 2009 (11 months)
(In thousands of
reais, except earnings (losses) per share)
|
Parent
Company
|
Consolidated
|
||||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
||||||||||||||
|
Gross
operating sales
|
|||||||||||||||||
|
Sales of
goods and services
|
2,722,619 | 1,685,721 | 16,685,884 | 6,732,757 | |||||||||||||
|
Taxes and
sales deductions
|
(139,525 | ) | (100,530 | ) | (1,349,829 | ) | (462,668 | ) | |||||||||
|
Net operating
sales
|
2,583,094 | 1,585,191 | 15,336,055 | 6,270,089 | |||||||||||||
|
Cost of goods
sold and services rendered
|
(2,097,657 | ) | (1,343,113 | ) | (13,210,692 | ) | (5,470,657 | ) | |||||||||
|
Gross
profit
|
485,437 | 242,078 | 2,125,363 | 799,432 | |||||||||||||
|
Operating
income (expenses)
|
|||||||||||||||||
|
Selling
expenses
|
(151,073 | ) | (124,699 | ) | (864,601 | ) | (432,550 | ) | |||||||||
|
General and
administrative expenses
|
(244,005 | ) | (132,378 | ) | (497,153 | ) | (275,892 | ) | |||||||||
|
Financial,
net
|
Note
18
|
433,308 | (438,788 | ) | 420,353 | (817,419 | ) | ||||||||||
|
Income (loss)
on equity investments
|
Note 8
|
594,830 | (121,974 | ) | (18,645 | ) | 13,976 | ||||||||||
|
Goodwill
amortization
|
- | (60,456 | ) | - | (196,467 | ) | |||||||||||
|
Goodwill
realized through sale
|
Note 8
|
- | - | (85,589 | ) | - | |||||||||||
|
Other
operating income (expenses), net
|
Note
19
|
77,079 | 4,121 | 333,141 | 199,859 | ||||||||||||
| 710,139 | (874,174 | ) | (712,494 | ) | (1,508,493 | ) | |||||||||||
|
Operating
income (loss) before income and social contribution taxes
|
1,195,576 | (632,096 | ) | 1,412,869 | (709,061 | ) | |||||||||||
|
Income and
social contribution taxes
|
|||||||||||||||||
|
Current
|
Note
12.a
|
- | 8,698 | (78,381 | ) | (1,735 | ) | ||||||||||
|
Deferred
|
Note
12.a
|
(209,081 | ) | 149,562 | (355,454 | ) | 236,401 | ||||||||||
| (209,081 | ) | 158,260 | (433,835 | ) | 234,666 | ||||||||||||
|
Net income
(loss) before minority interest
|
986,495 | (473,836 | ) | 979,034 | (474,395 | ) | |||||||||||
|
Minority
interest
|
- | - | 7,461 | 559 | |||||||||||||
|
Net income
(loss) for the year
|
986,495 | (473,836 | ) | 986,495 | (473,836 | ) | |||||||||||
|
Earnings
(loss) per share – in Reais
|
2.43 | (1.44 | ) | ||||||||||||||
The notes are an
integral part of the financial statements.
4
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Statement of
changes in shareholders’ equity
Years ended March
31, 2010 and 2009 (11 months)
(In thousands of
reais)
|
Capital
reserve
|
Income
reserve
|
Revaluation
reserve
|
||||||||||||||||||||||||||||||||||||||
|
Capital
|
Treasury
shares
|
Recorded
granted options
|
Legal
reserve
|
Reserve
for new investments and renovation
|
Company
|
Subsidiaries
|
Other
comprehensive
|
Retained
earnings / (accumulated losses)
|
Total
|
|||||||||||||||||||||||||||||||
|
Balances at
April 30, 2008
|
2,935,268 | - | - | 15,954 | 180,210 | 107,742 | 86,626 | - | - | 3,325,800 | ||||||||||||||||||||||||||||||
|
Adoption of
Law 11,638/07 and MP 449/08
|
- | - | 34,368 | - | - | (107,742 | ) | (86,626 | ) | - | (215,254 | ) | (375,254 | ) | ||||||||||||||||||||||||||
|
Capital
increase due to exercise of subscription right
|
880,000 | - | - | - | - | - | - | - | - | 880,000 | ||||||||||||||||||||||||||||||
|
Capital
increase in view of Stock Option Plan
|
4,502 | - | - | - | - | - | - | - | - | 4,502 | ||||||||||||||||||||||||||||||
|
Stock
purchase
|
- | (4,186 | ) | - | - | - | - | - | - | - | (4,186 | ) | ||||||||||||||||||||||||||||
|
Recorded
granted options
|
- | - | 11,473 | - | - | - | - | - | - | 11,473 | ||||||||||||||||||||||||||||||
|
Own effect
over expenses with share placement at associated company
|
- | - | - | - | - | - | - | - | (2,752 | ) | (2,752 | ) | ||||||||||||||||||||||||||||
|
Loss in the
year
|
- | - | - | - | - | - | - | - | (473,836 | ) | (473,836 | ) | ||||||||||||||||||||||||||||
|
Accumulated
losses
|
- | - | - | (15,954 | ) | (180,210 | ) | - | - | - | 196,164 | - | ||||||||||||||||||||||||||||
|
Balances at
March 31, 2009
|
3,819,770 | (4,186 | ) | 45,841 | - | - | - | - | - | (495,678 | ) | 3,365,747 | ||||||||||||||||||||||||||||
|
Capital
increase due to merger of Curupay into the company
|
334,172 | - | - | - | - | - | - | - | - | 334,172 | ||||||||||||||||||||||||||||||
|
Capital
increase in view of Stock Option Plan
|
6,004 | - | - | - | - | - | - | - | - | 6,004 | ||||||||||||||||||||||||||||||
|
Capital
increase due to exercise of subscription bonus
|
527,880 | - | - | - | - | - | - | - | - | 527,880 | ||||||||||||||||||||||||||||||
|
Recorded
granted options
|
- | - | 8,971 | - | - | - | - | - | - | 8,971 | ||||||||||||||||||||||||||||||
|
Other
comprehensive income
|
- | - | - | - | - | - | - | (2,944 | ) | - | (2,944 | ) | ||||||||||||||||||||||||||||
|
Net income in
the year
|
- | - | - | - | - | - | - | - | 986,495 | 986,495 | ||||||||||||||||||||||||||||||
|
Net income
allocation:
|
||||||||||||||||||||||||||||||||||||||||
|
Legal
reserve
|
- | - | - | 24,541 | - | - | - | - | (24,541 | ) | - | |||||||||||||||||||||||||||||
|
Minimum
mandatory dividends
|
- | - | - | - | - | - | - | - | (116,569 | ) | (116,569 | ) | ||||||||||||||||||||||||||||
|
Reserves
|
- | - | - | - | 349,707 | - | - | - | (349,707 | ) | - | |||||||||||||||||||||||||||||
|
Balance on
March 31, 2010
|
4,687,826 | (4,186 | ) | 54,812 | 24,541 | 349,707 | - | - | (2,944 | ) | - | 5,109,756 | ||||||||||||||||||||||||||||
The notes are an
integral part of the financial statements.
5
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Statements of cash
flows
Years ended March
31, 2010 and 2009 (11 months)
(In thousands of
reais)
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Cash
flows from operating activities
|
||||||||||||||||
|
Net income
(loss) for the period
|
986,495 | (473,836 | ) | 986,495 | (473,836 | ) | ||||||||||
|
Adjustments
to reconcile net income (loss) for the period to cash provided by
operating activities
|
||||||||||||||||
|
Depreciation
and amortization
|
190,352 | 171,414 | 636,344 | 427,157 | ||||||||||||
|
Losses
(income) on equity investments
|
(594,830 | ) | 121,974 | 18,645 | (13,976 | ) | ||||||||||
|
Loss (income)
from disposal of permanent assets
|
2,669 | (18,023 | ) | (80,466 | ) | (208,939 | ) | |||||||||
|
Goodwill
amortization and realized through sale
|
- | 60,456 | 85,589 | 196,467 | ||||||||||||
|
Deferred
income and social contribution taxes
|
209,081 | (149,562 | ) | 355,454 | (236,401 | ) | ||||||||||
|
Recording of
provision for legal claims
|
19,746 | 27,307 | 25,829 | 25,908 | ||||||||||||
|
Minority
interest
|
- | - | (7,461 | ) | (559 | ) | ||||||||||
|
Recorded
granted options
|
8,971 | 11,473 | 8,971 | 11,473 | ||||||||||||
|
Net earnings
from adhesion to tax payment in installments
|
(77,833 | ) | - | (270,333 | ) | - | ||||||||||
|
Interest,
monetary and exchange variation, net
|
(193,567 | ) | 594,570 | (150,465 | ) | 932,529 | ||||||||||
|
Other
|
(17,852 | ) | (8,198 | ) | (8,283 | ) | 1,685 | |||||||||
| 533,232 | 337,575 | 1,600,319 | 661,508 | |||||||||||||
|
Changes in
assets and liabilities
|
||||||||||||||||
|
Trade
accounts receivables
|
(81,633 | ) | (54,569 | ) | 2,415 | (54,856 | ) | |||||||||
|
Inventories
|
104,878 | (113,061 | ) | 224,698 | (198,854 | ) | ||||||||||
|
Recoverable
taxes
|
(24,017 | ) | (31,495 | ) | (36,572 | ) | (76,073 | ) | ||||||||
|
Advances to
suppliers
|
4,205 | 19,585 | 66,542 | 48,831 | ||||||||||||
|
Suppliers
|
23,489 | 33,574 | (46,515 | ) | 77,389 | |||||||||||
|
Salaries
payable
|
19,046 | (3,270 | ) | 30,565 | (15,314 | ) | ||||||||||
|
Derivative
financial instruments and restricted cash
|
(244,409 | ) | 77,968 | (231,043 | ) | 77,968 | ||||||||||
|
Other assets
and liabilities, net
|
42,611 | 2,387 | (52,575 | ) | (93,576 | ) | ||||||||||
| (155,830 | ) | (68,881 | ) | (42,485 | ) | (234,485 | ) | |||||||||
|
Net cash
generated from operating activities
|
377,402 | 268,694 | 1,557,834 | 427,023 | ||||||||||||
|
Cash
flows from investments activities
|
||||||||||||||||
|
Acquisition
of new businesses, net of cash received and additions to
investments
|
(45,947 | ) | (2,644,627 | ) | (16,041 | ) | (1,823,587 | ) | ||||||||
|
Advance for
future capital increase
|
(360,716 | ) | - | - | - | |||||||||||
|
Addition to
property, plant and equipment, software and other intangible
assets
|
(292,821 | ) | (202,583 | ) | (1,926,123 | ) | (1,346,118 | ) | ||||||||
|
Cash from the
sale of aviation fuel business
|
- | - | 115,601 | - | ||||||||||||
|
Cash from the
sale of other permanent assets
|
725 | 35,302 | 10,613 | 372,060 | ||||||||||||
|
Net cash used
in investment activities
|
(698,759 | ) | (2,811,908 | ) | (1,815,950 | ) | (2,797,645 | ) | ||||||||
6
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Statements of cash
flow--Continued
Years ended March
31, 2010 and 2009 (11 months)
(In thousands of
reais)
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Cash
flows from financing activities
|
||||||||||||||||
|
Loans and
financing funded
|
1,415,120 | 1,232,689 | 3,427,928 | 1,478,000 | ||||||||||||
|
Amortization
of principal and interest on loans and financing, advances from customers
and Promissory Notes
|
(1,778,897 | ) | (120,081 | ) | (2,846,648 | ) | (257,169 | ) | ||||||||
|
Capital
increase
|
533,884 | 884,502 | 533,884 | 884,502 | ||||||||||||
|
Capital
increase in subsidiaries by minority shareholders
|
- | - | - | 15,376 | ||||||||||||
|
Purchase of
treasury stock
|
- | (4,186 | ) | - | (4,186 | ) | ||||||||||
|
Related
parties
|
48,449 | 13,859 | (498,038 | ) | (36,633 | ) | ||||||||||
|
Net cash
generated by financing activities
|
218,556 | 2,006,783 | 617,126 | 2,079,890 | ||||||||||||
|
Net
increase (decrease) in cash and cash equivalents
|
(102,801 | ) | (536,431 | ) | 359,010 | (290,732 | ) | |||||||||
|
Cash
and cash equivalents at the beginning of the period
|
388,726 | 925,157 | 719,356 | 1,010,088 | ||||||||||||
|
Cash
and cash equivalents at the end of the period
|
285,925 | 388,726 | 1,078,366 | 719,356 | ||||||||||||
|
Additional
cash flow information
|
||||||||||||||||
|
Interest paid
on loans and financing, advances from customers and Promissory
Notes
|
(154,234 | ) | (100,203 | ) | (388,854 | ) | (171,439 | ) | ||||||||
|
Income and
social contribution taxes paid
|
- | (671 | ) | (62,337 | ) | (8,926 | ) | |||||||||
The notes are an
integral part of the financial statements.
7
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Statement of value
added
Year ended March
31, 2010 and 2009 (11 months)
(In thousands of
reais)
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Revenues
|
||||||||||||||||
|
Sale of goods
and services, net of returns
|
2,708,873 | 1,684,302 | 16,598,210 | 6,724,924 | ||||||||||||
|
Other
operating income, net
|
77,079 | 4,121 | 333,141 | 199,859 | ||||||||||||
|
Reversal
(recording) of allowance for doubtful accounts
|
(30 | ) | (65 | ) | (20,591 | ) | 1,069 | |||||||||
| 2,785,922 | 1,688,358 | 16,910,760 | 6,925,852 | |||||||||||||
|
Inputs
acquired from third-parties
|
||||||||||||||||
|
Cost of goods
sold and services rendered
|
(1,607,579 | ) | (902,528 | ) | (11,659,630 | ) | (4,440,594 | ) | ||||||||
|
Material,
energy, outsourced services and other
|
(231,295 | ) | (153,836 | ) | (882,170 | ) | (501,965 | ) | ||||||||
| (1,838,874 | ) | (1,056,364 | ) | (12,541,800 | ) | (4,942,559 | ) | |||||||||
|
Gross
value added
|
947,048 | 631,994 | 4,368,960 | 1,983,293 | ||||||||||||
|
Retention
|
||||||||||||||||
|
Depreciation
and amortization
|
(190,352 | ) | (171,414 | ) | (636,344 | ) | (427,157 | ) | ||||||||
|
Amortization
of goodwill and realized through sale
|
- | (60,456 | ) | (85,589 | ) | (196,467 | ) | |||||||||
| (190,352 | ) | (231,870 | ) | (721,933 | ) | (623,624 | ) | |||||||||
|
Net
value added generated
|
756,696 | 400,124 | 3,647,027 | 1,359,669 | ||||||||||||
|
Value
added received as transfer
|
||||||||||||||||
|
Equity
investments
|
594,830 | (121,974 | ) | (18,645 | ) | 13,976 | ||||||||||
|
Financial
revenues
|
12,168 | 908,766 | 78,082 | 751,703 | ||||||||||||
| 606,998 | 786,792 | 59,437 | 765,679 | |||||||||||||
|
Total
value added to distribute
|
1,363,694 | 1,186,916 | 3,706,464 | 2,125,348 | ||||||||||||
|
Distribution
of value added
|
||||||||||||||||
|
Payroll and
charges
|
412,718 | 349,419 | 1,119,664 | 783,194 | ||||||||||||
|
Taxes, fees
and contributions
|
324,419 | (90,949 | ) | 1,538,232 | 135,786 | |||||||||||
|
Financial
expenses, rental and commercial leasing
|
(359,938 | ) | 1,402,282 | 69,534 | 1,680,763 | |||||||||||
|
Minority
interest
|
- | - | (7,461 | ) | (559 | ) | ||||||||||
|
Proposed
dividends
|
116,569 | - | 116,569 | - | ||||||||||||
|
Retained
earnings / (accumulated losses) for the period
|
869,926 | (473,836 | ) | 869,926 | (473,836 | ) | ||||||||||
| 1,363,694 | 1,186,916 | 3,706,464 | 2,125,348 | |||||||||||||
The notes are an
integral part of the financial statements.
8
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements
March 31, 2010 and
2009
(In thousands of
reais)
|
1.
|
Operations
|
Cosan S.A.
Indústria e Comércio (“Company” or “Cosan”), with principal place of business in
the city of Barra Bonita, São Paulo, is a publicly-held Company, controlled by
Cosan Limited, which holds 62.3% of its capital.
The primary
activities of Cosan, and its subsidiaries are (i) the manufacturing and trading
of sugar and ethanol, as well as energy cogeneration from sugarcane bagasse,
(ii) the distribution of fuel and lubricants, and (iii) logistics
transportation, warehousing and port lifting services.
The Company has 23
producing units, located in e São Paulo, Goiás and Mato Grosso do Sul States,
with a nominal capacity of milling 60 million tons of sugarcane per year,
producing varied qualities of raw and refined sugar, anhydrous and hydrated
ethanol.
The Company,
through its subsidiary Cosan Combustíveis e Lubrificantes S.A. (“Cosan CL”),
operates in 45 fuel distribution bases and a lubricants plant in Brazil and
ranks as one of the four biggest fuel distributors in the country, with a
distribution network of nearly 1,700 gas stations across Brazil, which sell 5
billion liters of fuels, 93 million cubic meters of NGV and 135 thousand cubic
meters of lubricants. Accordingly, the Company expanded its business model and
became the first integrated renewable energy company, acting from the plantation
of sugar cane to the distribution and retail sale of fuels.
Additionally, the
Company provides logistics transportation, warehousing and port lifting services
in the State of São Paulo through its Santos-based subsidiary Rumo Logística
S.A..
In
the Annual and Special Meeting held on August 29, 2008, the Company’s
shareholders changed the end of fiscal year to March 31 of each year. As a
result, the income, changes in shareholders' equity, cash flows and value added
statements for the year ended on March 31, 2009, and the related notes, which
are used for comparison purposes, cover eleven (11) months' operations and
therefore cannot be compared to those prepared for the year ended on March 31,
2010, which in turn represent twelve (12) months' operations.
Additionally, the
same financial statements cover 4 months' of income for Cosan CL for the period
of 11 months ended March 31, 2009, which began to be consolidated as of December
1, 2008, and 10 months of income for Cosan Alimentos S.A. for the year ended
March 31, 2010, which began to consolidated as of June 1, 2009.
9
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
1.
|
Operations
(Continued)
|
During the year
ended on March 31, 2010, the Company and its subsidiaries performed the
following transactions:
|
|
a.
|
Novo Rumo Logística
S.A.
|
Pursuant to a
certain shareholders’ agreement entered into in April 2008, port concessions and
assets used in sugar export operations of the Company and of Rezende Barbosa
S.A. Administração e Participações (“Rezende Barbosa”), including Teaçu Armazéns
Gerais S.A. (“Teaçu”), were transferred to Novo Rumo Logística S.A. (“Novo
Rumo”), an indirect subsidiary of the Company. Please see Note 8 for further
details of this transaction.
|
|
b.
|
Operating partnership
between Rumo Logística S.A. (“Rumo”) and ALL – América Latina Logística
S.A. (“ALL”)
|
On
March 5, 2009, Rumo and ALL announced an agreement for the expansion of their
rail transportation capacity. This arrangement anticipates investments to be
made by Rumo in railway-related assets (locomotives, rail cars and expansion of
the railway network) in the amount of approximately R$875,000. According to the
agreement, this expanded capacity will be operated by ALL and used primarily for
providing transportation services for sugar or other solid sugar cane
commodities. This agreement is set to be in force until 2028.
|
|
c.
|
Curupay Participações
S.A.
|
In
June 2009, the Company’s shareholders approved at the extraordinary general
meeting the acquisition of Curupay S.A. Participações (“Curupay”), a subsidiary
of Rezende Barbosa at the time, through issuance of 44,300,389 shares of common
stock in the amount of R$334,172. Please see Note 8 for further details of this
transaction.
|
|
d.
|
Sale of Aviation Fuel
Business to Shell do Brasil
Ltda.
|
In
June 2009, Cosanpar Participações S.A. (“Cosanpar”), a subsidiary of the
Company, sold to Shell its assets in aviation fuel businesses. Please see Note 8
for further details of this transaction.
10
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
1.
|
Operations
(Continued)
|
|
|
e.
|
Santos Ethanol Export
Terminal (“TEAS”)
|
In
November 2009 the Company acquired the controlling interest in TEAS for the sum
of R$20,002, resulting in an stake of 66.67% in the entity’s voting and total
stock. Please see Note 8 for further details of this transaction.
|
|
f.
|
Logispot Armazéns
Gerais S.A. (“Logispot”)
|
In
November 2009, Cosan, through its subsidiary Rumo, acquired a 14.28% equity
interest in Logispot for the total amount of R$19.992. Please see Note 8 for
further details of this transaction.
|
|
g.
|
Acquisition of
Petrosul Gas Station Chain
|
In
December 2009 the Company entered into a purchase and sale agreement in the
estimated amount of R$51,000 for the acquisition of 46 gas
stations.
|
|
h.
|
Shell Joint
Venture
|
In
February 2010 the Company signed a non-binding memorandum of understanding
together with Shell International Petroleum Company Ltd. (“Shell”) which will be
valid for 180 days, whereby both companies plan to pool the Company’s sugar and
ethanol assets and distribution facilities with Shell’s distribution facilities
in Brazil. Pursuant to this non-binding memorandum of understanding, Shell will
make a capital contribution in the amount of approximately US$1.6 billion
(equivalent to R$2,900,000 at the exchange rate of March 31, 2010) within two
years. This agreement will become official upon certain requirements being met
and the conclusion of negotiations.
|
2.
|
Basis
of preparation and presentation of the financial
statements
|
The Company’s
financial statements for the year ended March 31, 2010 and 2009, were prepared
based on the accounting standards adopted in Brazil and on the rules issued by
the Brazilian Securities and Exchange Commission (“CVM”), observing the
accounting guidelines set forth in the corporate law (Law Nº 6404/76) which
include the new provisions established, amended and repealed by Laws 11638/07
and 11941/09,as well as standards, guidelines and interpretations issued by the
Accounting Standards Board (“CPC”). These financial statements were approved by
the Company's Board of Directors on June 7, 2010.
11
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
2.
|
Basis of preparation and
presentation of the financial statements
(Continued)
|
During 2009 the CPC
issued, and CVM approved, several standards, interpretations and guidelines
requiring companies to present new financial statements for the comparative
year. These standards are mandatory only for fiscal years beginning on or after
January 1, 2010 with the requirement to present comparative
figures.
As
an alternative, the Company could have adopted the standards applicable to
fiscal years beginning on or after January 1, 2010, for the accounting period
ended as early as March 31, 2010, provided it did so for the entirety of the
earlier period. The Company elected not to apply the aforementioned standards
for the relevant financial statements. The Company hereinafter presents brief
descriptions that to the best of its understanding will explain potential
significant changes in relation to the accounting principles previously adopted
for financial statements as of March 31, 2010, and also comparative periods.
Additionally, below is some information that according to the Company's
management may have significant impacts on the Company's financial statements as
a result of future transactions.
|
|
·
|
CPC 15 – Business
Combinations, approved in CVM Statement No. 580 dated July 31,
2009
|
This standard
essentially sets forth principles and requirements applicable to an acquiring
entity taking part in a combination of businesses.
The Company
anticipates that the disclosed figures relating to the acquisition of Teaçu and
Curupay will change when this standard, which introduces a new technique that
measures goodwill as expected future earning power, is applied retroactively to
April 1, 2009, as a result of measuring the net assets of Teaçu and Curupay at
the fair value of acquired assets and liabilities (including any identified
intangible assets), as well as in view of the measurement of the relevant
payment methods used. Therefore, as it will be eliminated, against shareholders’
equity, goodwill deriving from minority interest when there is no change in
control.
12
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
2.
|
Basis of preparation and
presentation of the financial statements
(Continued)
|
|
|
·
|
CPC 16 – Inventories,
approved in CVM Statement No. 575 dated June 5,
2009
|
This standard
essentially establishes how to recognize, measure, and reduce inventories to
their net realizable value, as well as certain criteria related to costing,
manner of allocating costs to results and the requirement to disclose inventory
information in notes to financial statements.
The Company does
not anticipate the cited standard will have any significant impact on its
financial statements, as its inventory-related accounting practices are aligned
with those set forth in the cited CPC standard, except that agricultural produce
from sugar cane plantations will comply with CPC 29 – Biological Assets and
Agricultural Produce.
|
|
·
|
CPC 20 – Loan Costs,
approved in CVM Statement No. 577 dated June 5,
2009
|
This standard sets
forth a method of accounting for loan costs susceptible of being capitalized in
the cost of certain assets deemed eligible, and which are directly attributable
to the acquisition, building or manufacture of such assets.
The Company does
not capitalize loan costs directly attributable to eligible assets. Thus, the
aforementioned standard may have some impact on the Company's financial
statements depending on what option will be evaluated by the Company's
management in 2010.
|
|
·
|
CPC 22 – Segment
Reporting, approved in CVM Statement No. 582 dated July 31,
2009
|
This standard
requires that the Company will disclose financial information segregated by its
operating segments.
The Company's
management has already elected to include in the financial statements additional
information and metrics related to assets, liabilities, and results identified
for each of the Company's operating segments. Such information is included in
these financial statements.
13
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
2.
|
Basis of preparation and
presentation of the financial statements
(Continued)
|
|
|
·
|
CPC 24 – Subsequent
Event, approved in CVM Statement No. 593 dated September 15,
2009
|
The most
significant impact resulting from application of this standard regard accounting
for dividends. According to this standard, at the end of each fiscal year the
Company must recognized as liability only the minimum mandatory dividend as
provided for in its by-laws.
By
adopting this standard, any dividends in excess of minimum mandatory dividends
will be recorded as liabilities, to the extent such additional dividends are
approved by the Company's authorized bodies.
|
|
·
|
CPC 26 – Presentation
of Financial Statements, approved in CVM Statement No. 595 dated September
15, 2009
|
This standard sets
out the basis for presentation of financial statements by establishing general
presentation requirements, financial statement structuring guidelines and the
minimum level of information to be included in an entity's financial
statements.
Two new
requirements were introduced in relation to the prior standard: (i) disclosure
of comprehensive income (loss) and (ii) disclosure of three balance sheets in
situations where the Company employs accounting policies retroactively or
restate its financial statements.
|
|
·
|
CPC 27 – Property
Plant and Equipment, approved in CVM Statement No. 583 dated July 31
2009
|
This standard sets
out the accounting treatment applicable to property, plant and equipment,
specially with regard to (i) recognition of such assets, (ii) their measurement,
(iii) manner of determining depreciation and (iv) devaluation losses, and
includes a (v) requirement to disclose such asset's information in notes to
financial statements.
The Company is
still reviewing whether or not the aforementioned standard will have any
significant impact on its financial statements.
14
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
2.
|
Basis of preparation and
presentation of the financial statements
(Continued)
|
|
|
·
|
CPC 29 – Biological
Assets and Agricultural Produce, approved in CVM Statement No. 596 dated
September 15, 2009
|
This standard sets
out the accounting treatment and financial statement disclosure rules for
biological assets and agricultural produce, particularly with regard to the
manner of measurement. Such assets are measured at their transformation-date
fair value, with immediate impact on income.
The Company
anticipates this standard to have a significant impact on its financial
statements, since its current accounting policy regarding biological assets and
agricultural produce (represented by sugar cane plantations and harvests) is at
considerable variance with the accounting policy established by this Technical
Pronouncement.
Below is a brief
description of the main expected impacts:
|
|
i)
|
Change in the
manner of recognizing gains and losses by using fair value instead of
formation historical cost.
|
|
|
ii)
|
Changes in
performance metrics on account of the above-described recognition method,
since fair value will introduce volatility to
income.
|
|
|
iii)
|
Significant
increase in disclosure levels in notes to financial
statements.
|
|
|
iv)
|
Impacts on
dividend policy.
|
|
|
·
|
CPC 37 – First-Time
Adoption of International Accounting Standards, approved in CVM Statement
No. 609 dated December 22, 2009, and CPC 43, Initial Application of CPC
Standards 15 through 40, approved in CVM Statement No. 610 dated December
22, 2009
|
The goal of CPC
Standard No. 37 is to establish guidelines to ensure that financial statements
are prepared in accordance with international accounting rules set forth by the
International Accounting Standards Board (IASB).
These CPCs
introduce new exemptions that can impact the Company's financial statements,
especially with regard to Property Plant and Equipment and pension
plans.
15
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
2.
|
Basis of preparation and
presentation of the financial statements
(Continued)
|
|
|
·
|
CPC 38, 39 and 40 –
Financial Instruments: Recognition, Measurement, Presentation and
Disclosure, approved in CVM Statement No. 604 dated November 19,
2009
|
CPC 38 – Financial
Instruments: Recognition and Measurement
This standard sets
out rules governing recognition and measurement of transactions involving
financial instruments, including derivatives.
CPC 38 introduces
an array of new concepts that were not present in CPC 14. The main items not
covered in CPC 14 are embedded derivatives, non-recognition of financial assets
and liabilities and provision for impairment losses.
The Company does
not anticipate the aforementioned standard will have any significant impact on
its financial statements.
CPC 39 – Financial
Instruments: Presentation
This standard sets
out principles applicable to the presentation of financial instruments as either
net assets or liabilities and to the offsetting of financial assets and
liabilities.
The Company does
not anticipate the aforementioned standard will have any significant impact on
its financial statements.
CPC 40 – Financial
Instruments: Disclosure
This standard
introduces a requirement covering disclosure of financial instruments with
sufficient level of detail in order to establish the relevance of such
instruments relative to an entity's asset and financial position.
The Company does
not anticipate the aforementioned standard will have any significant impact on
the disclosure of financial instrument information in its financial
statements.
16
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
3.
|
Summary
of Significant Accounting Policies
|
a) Revenue
Recognition
Income from
operations is determined in conformity with the accrual accounting method. Sales
revenues are reported as gross figures, that is, they include taxes levied and
discounts applied on said revenues, which are presented as contra-revenue
accounts. Revenue derived from sales of products is recognized in the
income when a product is delivered, and all risks and benefits are transferred,
to the purchaser. Revenue derived from sales of services is recognized in the
income when services are effectively provided by the Company.
b) Conversion of Balances
Expressed in Foreign Currency
(i) Functional
Currency and Currency of Financial Statement Presentation
The Company's
functional currency is the Brazilian real, which is also the currency used for
presentation of both parent (Company) and consolidated financial statements. The
financial statements of each consolidated subsidiary and those used as basis for
investment appraisal using the equity accounting method are prepared using the
functional currency of each company.
Assets and
liabilities of foreign subsidiaries are translated into Brazilian reais at
year-end exchange rates while income and expenses are translated using
average-for-the year exchange rates. The effects of this currency translation
are recorded in the shareholders' equity of each such subsidiary.
(ii) Transactions
Expressed in Foreign Currency
Money assets and
liabilities denominated in foreign currency are translated to Brazilian reais
using the prevailing exchange rate at each respective subsidiary's year end. The
results of converting these assets and liabilities at the exchange rate
prevailing on the date of each transaction and at the exchange rate prevailing
on each respective year end are recognized as either financial income or expense
on the statement of income.
17
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
3.
|
Summary of Significant
Accounting Policies
(Continued)
|
c) Financial
Instruments
Financial
instruments are recognized only at the date on which the Company becomes a party
to the relevant financial instrument agreement. When recognized, financial
instruments are initially recorded at their fair value plus any transaction
costs directly attributable to their acquisition or issuance, except that for
financial assets and liabilities recorded at fair value through income, such
costs are allocated directly in the year's statement of income. Subsequent
measurement of such assets and liabilities occurs at each year end in accordance
with the rules applicable to each financial asset and liability classification
category as follows:
Financial assets:
These assets are classified into one of the following categories based on the
nature of each financial instrument contracted or issued:
|
|
(i)
|
Financial Assets Measured at
Fair Value Through Profit and Loss: These include financial assets
maintained for negotiation and assets designated at initial recognition at
fair value through income. Assets are classified as maintained for
negotiation if they originate for the purpose of being sold or repurchased
in the short term. Derivatives also are measured at fair value through
income, save for those designated as hedge
instruments. Interest, inflation adjustments, exchange
variations and variations resulting from valuation at fair value are
recognized on the statement of income when incurred in either the
financial revenue or expense line.
|
|
(ii)
|
Investments Held to
Maturity: Non-derivative financial assets with fixed payments or
determinable payments with defined maturity for which the Company has a
firm intent and ability to maintain until the maturity date. Interest,
inflation adjustments, exchange variations, less impairment losses, where
applicable, are recognized on the statement of income when incurred in
either the financial revenue or expense
line.
|
|
(iii)
|
Receivables:
Non-derivative financial assets with fixed or determinable payments,
however not listed in an active market. Interest, inflation adjustments,
exchange variations, less impairment losses, where applicable, are
recognized on the statement of income when incurred in either the
financial revenue or expense line.
|
|
The main
financial assets recognized by the Company are cash and cash equivalents,
trade notes receivable, derivative financial instruments and a loss and
damages award.
|
18
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
3.
|
Summary of Significant
Accounting Policies
(Continued)
|
c)
Financial Instruments
(Continued)
Financial
liabilities: These liabilities are classified into one of the following
categories based on the nature of each financial instrument contracted or
issued:
|
|
(i)
|
Financial Liabilities Measured
at Fair Value Through Profit and Loss: These include financial
liabilities usually traded before maturity, liabilities designated at
initial recognition at fair value through income and derivatives, except
derivatives designated as hedge instruments. Interest, inflation
adjustment, exchange variations and variations resulting from valuation at
fair value, where applicable, are recognized in the income when they are
incurred.
|
|
(ii)
|
Financial Liabilities not
Measured at Fair Value: These include non-derivative financial
liabilities not usually traded before maturity. Interest, inflation
adjustment and exchange variations, where applicable, are recognized in
the income when they are incurred.
|
|
The main
financial liabilities recognized by the Company are loans and financings,
vendor accounts payable and derivative financial
instruments.
|
Market Value: The
market value of financial instruments actively traded in organized markets is
determined based on their listed prices at year end. Where no active markets
exist, the market value is determined through certain valuation techniques.
These techniques include using recent arm's length market transactions,
reference to the market value of similar financial instruments, discounted cash
flow analysis or other valuation methods.
d)
Cash
and Cash Equivalents
These include
checking account balances and investments callable within 90 days from
investment date, recorded at their cost plus any earnings accrued until year
end, and for which there is negligible risk that any change in value will not
exceed their market values.
Investments deemed
as cash equivalents are mainly classified in the “financial assets measure at
fair value through income” category. Please see Note 4 for further details on
such investments.
19
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
3.
|
Summary of Significant
Accounting Policies
(Continued)
|
e)
Trade Accounts
Receivables
These include
customer receivables and are reduced to their likely realization value by use of
an allowance. This allowance for doubtful accounts is established at such amount
as the management deems sufficient to compensate for any losses in collecting
accounts receivable.
f)
Inventories
Inventories are
valuated at average acquisition or production cost, however not to exceed the
market value. Provisions for obsolete or slow-moving inventories are established
whenever the management deems necessary.
During the period
in which sugar cane plantations are developing, the associated costs are
recorded in a fixed asset account. After this development period, annual
plantation upkeep costs are considered in the current year's upkeep costs, as
crops, together with harvesting costs, plant depreciation and allocated overhead
costs. Annual upkeep costs include tillage, spraying, trimming and fertilizer
costs, which are allocated to production costs based on the amount of sugar cane
that is crushed during the harvest season.
At
Cosan harvest begins in March and April each year and usually ends in November
or December. Significant maintenance activities are performed from January
through March.
g)
Investments
The Company's
investments in controlled and subsidiary companies are valuated by the equity
pickup method. Other investments are valuated at acquisition cost less a
devaluation allowance, where applicable. Equity interests held in direct
subsidiaries Cosan International Universal Corporation and Cosan Finance
Limited, in indirect subsidiaries CCL Finance Limited and America Trading
Investments S.A., and in affiliate Vertical UK LLP are valuated against each
respective financial statements, adjusted to accounting principles generally
accepted in Brazil.
20
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
3.
|
Summary of Significant
Accounting Policies
(Continued)
|
h)
Property
Plant and Equipment
Property, plant and
equipment are stated at the acquisition or building cost, net of tax credits.
Depreciation of assets is computed using the straight-line method down to such
residual values as are estimated using rates that take into account the useful
lives described in Note 9.
Formation costs of
sugar cane plantations are stated at cost and amortized over a 5-year
period.
Cosan schedules and
performs maintenance work on its facilities on a yearly basis. Maintenance work
is carried out from January through March, during which period Cosan will
inspect its equipment for defective components and perform replacements as
applicable. Primary maintenance costs include labor, materials, and contractor
costs, as well as overhead expenses allocated during the harvest off-season.
Cosan uses the built-in overhaul method to account for the annual costs of
primary maintenance activities. Thus, the estimated share in the total cost of a
given piece of equipment that needs to be replaced every year is recorded as
part of the cost of that particular piece of equipment and depreciated over the
next harvest season. Replacements then occur during annual scheduled
maintenance activities. Regular maintenance costs are expensed as incurred since
replaced components do not enhance crushing capacity nor introduce any
improvements to equipment.
The Company
recognizes impairment of long-lived assets when certain events or changes in
asset circumstances indicate that the carrying amount of an asset, or of a group
of assets, may not be recoverable.
i)
Leasing
Financial lease
agreements are recognized as Property Plant and Equipment and in liabilities as
loans and financings, at the least of either the present value of minimum
contractual mandatory repayments or the asset's fair value. Amounts recorded as
Property Plant and Equipment are depreciated over the asset's estimated useful
life or the lease agreement term, whichever is shorter. Implied interest on
loans and financings recognized in liabilities are recognized in the income
according to each agreement term using the actual interest rate
method.
21
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
3.
|
Summary of Significant
Accounting Policies
(Continued)
|
i)
Leasing
(Continued)
Operating lease
agreements are recognized as expense consistently on such basis that represents
the period during which the intended benefit is obtained from the leased asset,
even if the relevant payments are not made on such basis.
j)
Intangibles
Any expected future
earning power (goodwill) generated from investment acquisitions occurred by or
before March 31, 2009, were amortized on a straight-line basis over 5 to 10
years until the foregoing date. Beginning on April 1, 2009, goodwill ceased to
be amortized and is now subject to an annual test for impairment.
On
March 31, 2009, software license rights and other intangibles were reclassified
from the Property Plant and Equipment account to intangible assets in the
amounts of R$26,475 and R$28,711, respectively for the parent and consolidated
statements, and were amortized using the straight-line over their useful
lives.
k) Impairment
Review
Management reviews
the net carrying amount of assets yearly for the purpose of identifying events
or changes in economic, operating or technological circumstances that may
indicate deterioration or impairment. Where evidence of such events is present
and the net carrying amount exceeds the recoverable value of an asset, a
provision is established for impairment and the net carrying amount is adjusted
to the recoverable value. The counter-entry to this provision is classified in
other operating expenses.
l)
Other Current and
Non-Current Assets
Other asses are
recognized when it is likely that the future benefits of an asset will accrue to
the Company and its cost and value can be reasonably measured. These assets are
presented in accordance with the timing and value of realization, including,
where applicable, any earnings, inflation adjustments and exchange
variations.
22
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
3.
|
Summary of Significant
Accounting Policies
(Continued)
|
m)
Liabilities
A
liability is recognized when it results from a legal obligation of the Company
or from past events and it is likely that funds will be required to settle the
same. Some liabilities are inherently uncertain with regard to term and amount,
and are thus estimated as incurred and accounted for in a provision. Provisions
are recorded based on best estimates of the associated risks.
n)
Stock-Based
Compensation
The senior
management of the Company receive a portion of their compensation in the form of
stock-based compensation, the settlement of which is also made in stock. The
costs of such transactions are recognized in the income over the period in which
an officer rendered its services to the Company, being also offset against a
capital reserve and measured at fair value. This fair value is measured at stock
plan award time and is not subject to any subsequent changes
whatsoever.
o)
Taxation
Sales revenues are
subject to taxation in accordance with the prevailing applicable Brazilian
laws.
Relevant taxes are
stated as deductions from sales in the income statement. Specifically, credits
generated by non-cumulative PIS/COFINS are reported as reducing the cost of
products sold in income statements. No tax is levied on export revenues nor on
the income of direct subsidiaries Cosan International and Cosan Finance, and of
indirect subsidiaries CCL Finance Limited and America Trading Investments,
S.A.
Income taxation
includes both the income tax and a social security contribution. Income tax is
levied at the rate of 15%, plus a 10% surcharge on any income that exceeds R$240
in a period of 12 months, while the social security contribution is levied at
the rate of 9%, on taxable income recognized on an accrual
basis. Deferred taxes relative to tax losses, the social security
negative taxable basis and interim differences are reported in current and
non-current assets and calculated by the rates prevailing at realization time,
as well as reviewed yearly. These tax credits are recognized only to the extent
it is likely that a taxable basis will exist against which interim differences
may be used.
23
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
3.
|
Summary of Significant
Accounting Policies
(Continued)
|
o)
Taxation
(Continued)
Advance tax
payments or amounts subject to offsetting are reported in current and
non-current assets, in accordance with their estimated realization.
p)
Loans and
Financing
Loans and
financings are updated against inflation adjustments or exchange variations, as
applicable, and include any interest accrued by or before year end.
q)
Adjustment of Assets and
Liabilities to Present Value
Long-term money
assets and liabilities are adjusted to their present value, while short-term
assets and liabilities are adjusted when the impact of such adjustment is deemed
significant with regard to the combined financial statements. Adjustment to
present value is calculated considering contractual provisions and explicit, and
in certain situations, implicit, interest rate of each respective asset and
liability. If relevant, this interest is reassigned to financial expense and
income lines on the income statement.
r)
Accounting
Estimates
The Company and its
subsidiaries employ estimates for the purpose of measuring and recognizing
certain assets and liabilities in their financial statements. Computation of
such estimates takes into account experience learned with past and current
events, assumptions regarding future events and other criteria, both objective
and subjective. Significant estimates include determination of useful
lives of fixed and intangible assets; allowance for doubtful accounts; provision
for inventory losses; provision for investment losses; impairment testing of
fixed and intangible assets; expected realization of deferred income tax and
social security contribution; rates and periods employed in determining the
present value adjustment for certain assets and liabilities; provision for court
decisions and actuarial liabilities; measurement of the fair value of
stock-based compensation and financial instruments; recognition and measurement
of development costs classified in intangible assets; and estimates concerning
disclosure of sensitivity analysis schedule for derivative financial instruments
in conformity with CVM Statement No. 475/08.
24
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
3.
|
Summary of Significant
Accounting Policies
(Continued)
|
r)
Accounting
Estimates (Continued)
Settlement of
transactions involving the foregoing estimates may result in figures
significantly different from those reported on financial statements on account
of inherent inaccuracies of the estimation process. The Company reviews its
estimates and underlying assumptions from time to time.
s)
Income (Loss) per
Share
Income (loss) per
share is calculated taking into account the number of outstanding shares at year
end.
t)
Consolidation of Financial
Statements
The consolidated financial
statements include financial information of the Company and of its subsidiaries
and were prepared in conformity with basic consolidation principles. The
consolidation process includes the following steps: (i) Intercompany assets and
liabilities are eliminated; (ii) Equity investments in subsidiaries,
proportionate to the parent company interest in the shareholders’ equity of
subsidiaries, are eliminated; (iii) Intercompany revenues and expenses are
eliminated; and (iv) Significant unearned intercompany income is eliminated,
when relevant.
The fiscal years of
consolidated entities reflect that of the Company, or the effects determined as
of March 31, 2010, were considered for consolidation
purposes. Accounting policies were applied consistently at
consolidated entities and in keeping with the policies used in the precedent
year.
Special purpose
entities are consolidated when their relationship with the Company denotes that
the former are controlled by the latter. Control is evidenced, among others, by
an assessment of the Company's exposure to risks associated with, and benefits
generated by the relevant entity.
25
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
3.
|
Summary of Significant
Accounting Policies
(Continued)
|
t)
Consolidation of Financial
Statements (Continued)
The main
consolidated companies are listed below:
|
Direct
and indirect interest as of
|
||||||||
|
03/31/10
|
03/31/09
|
|||||||
|
Administração
de Participações Aguassanta Ltda.
|
91.5 | % | 91.5 | % | ||||
|
Cosan S.A
Açúcar e Álcool (“Cosan Açúcar e Álcool”) (1)
|
99.6 | % | 99.6 | % | ||||
|
Águas da
Ponte Alta S.A.
|
99.6 | % | 99.6 | % | ||||
|
Vale da Ponte
Alta S.A.
|
99.6 | % | 99.6 | % | ||||
|
Agrícola
Ponte Alta S.A.
|
99.6 | % | 99.6 | % | ||||
|
Cosan
Centroeste S.A. Açúcar e Álcool
|
99.6 | % | 99.6 | % | ||||
|
Barra
Bioenergia S.A.
|
99.6 | % | 99.6 | % | ||||
|
DaBarra
Alimentos Ltda.
|
99.6 | % | 99.6 | % | ||||
|
Bonfim Nova
Tamoio – BNT Agrícola Ltda.
|
99.6 | % | 99.6 | % | ||||
|
Benálcool
Açúcar e Álcool S.A.
|
99.6 | % | 99.6 | % | ||||
|
Barrapar
Participações Ltda.
|
99.6 | % | 99.6 | % | ||||
|
Aliança
Indústria e Comércio de Açúcar e Álcool S.A.
|
99.6 | % | 99.6 | % | ||||
|
Cosan
Distribuidora de Combustíveis Ltda.
|
99.9 | % | 99.9 | % | ||||
|
Cosan S.A.
Bioenergia
|
100.0 | % | 100.0 | % | ||||
|
Cosan
International Universal Corporation
|
100.0 | % | 100.0 | % | ||||
|
Cosan Finance
Limited
|
100.0 | % | 100.0 | % | ||||
|
Grançucar
S.A. Refinadora de Açúcar
|
100.0 | % | 100.0 | % | ||||
|
Cosanpar
Participações S.A. (4)
|
- | 100.,0 | % | |||||
|
Cosan
Combustíveis e Lubrificantes S.A.
|
100.0 | % | - | |||||
|
Copsapar
Participações S.A.
|
90.0 | % | 90.0 | % | ||||
|
Novo Rumo
Logística S.A.
|
92.9 | % | - | |||||
|
Rumo
Logística S.A.
|
92.9 | % | - | |||||
|
Cosan
Operadora Portuária S.A.
|
92.9 | % | 92.9 | % | ||||
|
Teaçú
Armazéns Gerais S.A.
|
92.9 | % | - | |||||
|
Teas Terminal
Exportador de Álcool de Santos S.A. (3)
|
66.7 | % | 32.0 | % | ||||
|
Pasadena
Empreendimentos e Participações S.A. (5)
|
- | - | ||||||
|
Cosan
Alimentos S.A.
|
100.0 | % | - | |||||
|
|
(1)
|
Previously
known as Usina da Barra S.A. Açúcar e
Álcool;
|
|
|
(2)
|
Formerly Nova
América S.A. – Agroenergia;
|
|
|
(3)
|
Holding
increase with shareholding acquisition (Note
8).
|
|
|
(4)
|
On June 23,
2009, the controlling Cosanpar Participações S.A. was merged into Cosan
CL; and
|
|
|
(5)
|
Special
purpose entity, controlled by the
Company
|
|
4.
|
Cash
and cash equivalents
|
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Cash
|
247 | 40 | 384 | 125 | ||||||||||||
|
“Overnight” investments
|
- | - | 50,470 | 67,137 | ||||||||||||
|
Bank checking
accounts
|
1,767 | 44,081 | 22,740 | 74,586 | ||||||||||||
|
Amounts
pending foreign exchange closing
|
125,882 | 46,776 | 127,755 | 48,969 | ||||||||||||
|
Marketable
securities
|
158,029 | 297,829 | 877,017 | 528,539 | ||||||||||||
| 285,925 | 388,726 | 1,078,366 | 719,356 | |||||||||||||
26
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
4.
|
Cash and cash equivalents
(Continued)
|
The balance of
Overnight investments refers to financial investments in US dollars made with
highly-rated banks, are remunerated according to the Federal Funds rate and may
be promptly redeemed.
Amounts pending
foreign exchange closing refer to receipts of funds in foreign currency from
customers located abroad, whose foreign exchange closing with the applicable
financial institutions had not occurred as of the balance sheet
date.
The balances of
Marketable Securities mainly correspond to investments in Bank Deposit
Certificates – CDB, allowing immediate redemption, are made with highly-rated
banks and accrue in average 101.49% of the Interbank Deposit Certificate -
CDI.
|
5.
|
Trade
accounts receivable
|
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Domestic
|
97,930 | 39,125 | 675,008 | 485,518 | ||||||||||||
|
International
|
127,837 | 74,066 | 148,655 | 162,822 | ||||||||||||
|
(-) Allowance
for doubtful accounts
|
(806 | ) | (776 | ) | (57,248 | ) | (49,177 | ) | ||||||||
| 224,961 | 112,415 | 766,415 | 599,163 | |||||||||||||
|
6.
|
Inventories
|
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Finished
goods:
|
||||||||||||||||
|
Sugar
|
10,050 | 56,328 | 93,610 | 109,265 | ||||||||||||
|
Ethanol
|
17,194 | 78,661 | 56,232 | 200,980 | ||||||||||||
|
Fuels
and lubricants
|
- | - | 286,461 | 274,430 | ||||||||||||
|
Harvest
costs
|
171,331 | 158,450 | 434,046 | 386,529 | ||||||||||||
|
Supplies and
other
|
63,851 | 57,907 | 221,641 | 158,083 | ||||||||||||
|
Provision for
inventory realization and obsolescence
|
(6,783 | ) | (9,856 | ) | (25,260 | ) | (23,102 | ) | ||||||||
| 255,643 | 341,490 | 1,046,730 | 1,106,185 | |||||||||||||
27
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
7.
|
Related
parties
|
|
Assets
|
||||||||||||||||
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Cosan Açúcar
e Álcool S.A.
|
276,121 | 78,026 | - | - | ||||||||||||
|
Cosan
Alimentos S.A.
|
122,679 | 30,382 | - | 30,382 | ||||||||||||
|
Cosanpar
Participações S.A.
|
- | 33,013 | - | - | ||||||||||||
|
Pasadena
Empreendimentos e Participações S.A.
|
22,160 | - | - | - | ||||||||||||
|
Cosan
Combustíveis e Lubrificantes S.A.
|
- | 37,580 | - | - | ||||||||||||
|
Rezende
Barbosa S.A. Administração e Participações
|
- | - | 87,071 | - | ||||||||||||
|
Other
|
30,423 | 17,318 | 19,199 | 26,850 | ||||||||||||
| 451,383 | 196,319 | 106,270 | 57,232 | |||||||||||||
|
Current
|
(429,223 | ) | (196,319 | ) | (24,859 | ) | (57,232 | ) | ||||||||
|
Noncurrent
|
22,160 | - | 81,411 | - | ||||||||||||
|
Liabilities
|
||||||||||||||||
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Cosan Finance
Limited
|
668,395 | 872,128 | - | - | ||||||||||||
|
CCL Finance
Limited
|
317,844 | - | - | - | ||||||||||||
|
Cosan
Limited
|
- | - | - | 405,871 | ||||||||||||
|
Cosan
Combustíveis e Lubrificantes S.A.
|
38,537 | - | - | - | ||||||||||||
|
Logispot
Armazéns Gerais S.A.
|
- | - | 11,244 | - | ||||||||||||
|
Other
|
36,016 | 7,824 | 3,172 | 4,458 | ||||||||||||
| 1,060,792 | 879,952 | 14,416 | 410,329 | |||||||||||||
|
Current
|
(92,818 | ) | (26,801 | ) | (14,416 | ) | (5,169 | ) | ||||||||
|
Noncurrent
|
967,974 | 853,151 | - | 405,160 | ||||||||||||
28
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
7.
|
Related parties
(Continued)
|
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Asset
balance transactions
|
||||||||||||||||
|
Fund
remittances, net of receipts and credit assignments
|
1,168,717 | 688,677 | (150,841 | ) | (561,019 | ) | ||||||||||
|
Payment for
capital of subsidiaries by means of wire transfers and advance for future
capital increase
|
- | (1,351,257 | ) | - | - | |||||||||||
|
Sales of
finished products, inputs and services (1)
|
171,238 | 143,867 | - | - | ||||||||||||
|
Purchases of
finished products, inputs and services (1)
|
(834,126 | ) | (265,283 | ) | - | - | ||||||||||
|
Sales of
finished products, inputs and services to affiliate and related
companies
|
89,985 | 108,015 | 255,944 | 283,337 | ||||||||||||
|
Purchase of
finished products, inputs and services from direct and indirect
subsidiaries
|
- | - | (147,255 | ) | - | |||||||||||
|
Sale of
property to related company
|
- | 32,337 | - | 32,337 | ||||||||||||
|
Sale of
equity interests to affiliate company
|
- | - | - | 286,272 | ||||||||||||
|
Merged
assets
|
- | - | 73,229 | - | ||||||||||||
|
Financial
revenues
|
19,966 | 248,848 | 17,961 | - | ||||||||||||
| 255,064 | (394,796 | ) | 49,038 | 40,927 | ||||||||||||
|
Liability
balance transactions
|
||||||||||||||||
|
Fund raising
(payments)
|
7,202 | (77,172 | ) | 5,035 | (6,251 | ) | ||||||||||
|
Export
per-payment financing
|
321,755 | - | - | - | ||||||||||||
|
Debt
assignment (payment) with associated companies
|
- | - | (322,333 | ) | 413,158 | |||||||||||
|
Financial
expense (revenue)
|
(148,117 | ) | 312,820 | (78,615 | ) | 3,422 | ||||||||||
| 180,840 | 235,648 | (395,913 | ) | 410,329 | ||||||||||||
|
(1)
|
It consists of operations carried
out between Cosan’s direct and indirect subsidiaries included in the
consolidation.
|
The purchase and
sale transactions are carried out at prices and under conditions similar to
those existing in the market.
The credit balance
of Cosan S.A Açúcar e Álcool as of March 31, 2010, corresponds to funds remitted
to its indirect subsidiary Cosan Centroeste S.A., which remittances were made
for account and at the order of such subsidiary and which bear no
interest.
On
January 21, 2010, Pasadena Empreendimentos and Participações S.A. ("Pasadena")
was incorporated. Pasadena was formed with the specific purpose of managing the
gas station chain acquired by the Company. As of March 31, 2010, the Company had
made advances in the amount of R$22,160 under a purchase and sale agreement
covering 46 gas stations, of which 9 stations had already been
acquired.
The receivable of
Cosan Alimentos S.A. essentially relates to advances made for a future capital
increase in that company. These advances do not accrue interest.
29
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
7.
|
Related parties
(Continued)
|
The receivable of
Cosanpar and of its direct subsidiary Cosan CL as of March 31, 2009, essentially
related to loan transactions for the reimbursement of expenses incurred in the
transition process regarding acquisition of Cosan CL. The foregoing balances did
not accrue interest. In the course of the period ended on March 31, 2010, both
balances were settled with the proceeds of the sale of Jacta (see Note 8) by
Cosan CL. Since these amounts exceeded the balances previously owed to Cosan,
the latter became a debtor of Cosan CL. The balance resulting from the
transactions, which was also maintained as loan, does not accrue
interest.
The receivable from
Rezende Barbosa S.A. Administração e Participações (“Rezende Barbosa”) is
related to credits assumed by that company, in connection with the acquisition
of Cosan Alimentos.
The balance payable
to Cosan Finance Limited refers to future sugar export prepayment loan
agreements to be settled in 2014, 2015 and 2016, which are subject to the US
dollar exchange variation and Libor annual interest rate, plus spread from 4.75%
to 4.85% per year.
The balance payable
to CCL Finance Limited refers to prepayment contracts for future sugar exports
to be settled in 2014, which is subject to US Dollar exchange variation and
annual interest of 9.5%.
The amount payable
to Cosan Limited concerned floating rate notes issued by Cosan CL in the amount
of US$175.000 with maturities in 2018. These notes bore variable interest at a
rate equal to the 3-month Libor rate plus 2.8% per annum, payable on a quarterly
basis. Cosan CL prepaid this debt fully in the course of the period ended on
March 31, 2010, using funds raised through senior notes with maturities in 2014 (see
Note 13).
The balance payable
to Logispot Armazéns Gerais S.A. (“Logispot”) refers to the outstanding payment
of interest acquired, the details of which are described in Note 8.
At
March 31, 2010, the Company and its subsidiary Cosan Açúcar e Álcool were
lessees of approximately 68,000 hectares of related companies land (unaudited
information). Furthermore, following the merger of Cosan Alimentos in June 2009,
the Company has acquired 2,784 thousand metric tonnes of sugar cane from Rezende
Barbosa. These operations are carried out under conditions and prices similar to
those prevailing in the market, calculated based on sugarcane tons per hectare,
valued in accordance with the price established by CONSECANA.
30
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
8.
|
Investments
|
|
|
(i)
|
At
March 31, 2010
|
|
Parent
Company
|
||||||||||||||||||||
|
Investees
|
Investor
|
|||||||||||||||||||
|
Shareholders'
equity
|
Year
income
|
Equity
interest %
|
Investments
|
Equity
pickup
|
||||||||||||||||
|
Administração
de Participações Aguassanta Ltda.
|
141,833 | 15,064 | 91.5 | 129,382 | 13,783 | |||||||||||||||
|
Cosan S.A.
Açúcar e Álcool
|
2,887,100 | 307,251 | 95.1 | 2,744,968 | 292,125 | |||||||||||||||
|
TEAS –
Terminal Exportador de Álcool de Santos S.A. (4)
|
47,730 | 1,302 | 66.7 | 39,121 | 505 | |||||||||||||||
|
Cosan S.A.
Bionergia
|
131,634 | (4,654 | ) | 100.0 | 131,634 | (4,653 | ) | |||||||||||||
|
Cosan
International Universal Corporation
|
607 | (9,488 | ) | 100.0 | 607 | (9,488 | ) | |||||||||||||
|
Cosan Finance
Limited
|
23,179 | 1,137 | 100.0 | 23,179 | 1,137 | |||||||||||||||
|
Radar
Propriedades Agrícolas S.A.
|
818,417 | 19,316 | 18.9 | 154,836 | 1,816 | |||||||||||||||
|
Cosanpar
Participações S.A. (1)
|
- | - | - | - | 72,212 | |||||||||||||||
|
Copsapar
Participações S.A.
|
193,158 | (4,762 | ) | 90.0 | 173,842 | (4,286 | ) | |||||||||||||
|
Cosan
Combustíveis e Lubrificantes S.A.
|
1,914,287 | 228,201 | 100.0 | 1,914,261 | 155,926 | |||||||||||||||
|
Novo Rumo
Logística S.A.
|
270,383 | (18,473 | ) | 28.8 | 77,924 | 3,043 | ||||||||||||||
|
Cosan
Alimentos S.A. (2) (3)
|
251,717 | 93,608 | 100.0 | 715,385 | 93,608 | |||||||||||||||
|
Other
investments
|
- | - | - | 20,012 | (20,898 | ) | ||||||||||||||
| 6,125,151 | 594,830 | |||||||||||||||||||
|
|
(1)
|
Merged by
Cosan Combustíveis e Lubrificantes S.A. on June 23,
2009;
|
|
|
(2)
|
Ten-month
period ended on March 31, 2010;
|
|
|
(3)
|
Includes the
amounts of R$360,761 and R$102,952 concerning an advance for future
capital increase and goodwill in the acquisition of Curupay, respectively;
and
|
|
|
(4)
|
Includes the
amount of R$7,301 referring to goodwill in the acquisition of
shares.
|
31
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
8.
|
Investments
(Continued)
|
|
|
(ii)
|
At
March 31, 2009
|
|
Parent
Company
|
||||||||||||||||||||
|
Investees
|
Investor
|
|||||||||||||||||||
|
Stockholders'
equity
|
Year
income
|
Equity
interest %
|
Investments
|
Equity
pickup
|
||||||||||||||||
|
Administração
de Participações Aguassanta Ltda.
|
126,340 | (15,510 | ) | 91.5 | 115,599 | (14,191 | ) | |||||||||||||
|
Cosan S.A.
Açúcar e Álcool
|
2,579,849 | (134,413 | ) | 95.1 | 2,452,843 | (119,136 | ) | |||||||||||||
|
TEAS –
Terminal Exportador de Álcool de Santos S.A.
|
46,084 | 1,744 | 32.0 | 14,747 | 615 | |||||||||||||||
|
Cosan S.A.
Bionergia
|
136,288 | (4,287 | ) | 100.0 | 136,288 | (4,287 | ) | |||||||||||||
|
Cosan
International Universal Corporation
|
13,245 | 4,786 | 100.0 | 13,245 | 4,786 | |||||||||||||||
|
Cosan Finance
Limited
|
28,879 | 10,362 | 100.0 | 28,879 | 10,362 | |||||||||||||||
|
Radar
Propriedades Agrícolas S.A.
|
736,529 | 15,434 | 18.9 | 139,343 | 2,919 | |||||||||||||||
|
Cosanpar
Participações S.A.
|
1,686,121 | (20,658 | ) | 100.0 | 1,686,121 | (20,658 | ) | |||||||||||||
|
Copsapar
Participações S.A.
|
195,589 | 6,284 | 90.0 | 176,030 | 5,655 | |||||||||||||||
|
Other
investments
|
- | - | - | 25,837 | 11,961 | |||||||||||||||
| 4,788,932 | (121,974 | ) | ||||||||||||||||||
32
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
8.
|
Investments
(Continued)
|
The quantity of
stock and/or units of subsidiaries and affiliates and the respective quantities
held by the Company on March 31, 2010 and 2009, are as follows:
|
2010
|
2009
|
|||||||||||||||
|
Stock/units
|
Stock/units
|
|||||||||||||||
|
Total
stock/units of Investee
|
Total
stock/units held by Investor
|
Total
stock/units of Investee
|
Total
stock/units held by Investor
|
|||||||||||||
|
Cosan S.A.
Bioenergia
|
140,575,100 | 140,575,100 | 140,575,100 | 140,575,100 | ||||||||||||
|
Administração
de Participações Aguassanta Ltda.
|
9 | 1 | 9 | 1 | ||||||||||||
|
Cosan S.A.
Açúcar e Álcool
|
3,115,704,233 | 2,962,318,537 | 3,115,704,233 | 2,962,318,537 | ||||||||||||
|
Copsapar
Participações S.A.
|
190,797,424 | 171,717,682 | 190,797,424 | 171,717,682 | ||||||||||||
|
Cosan
International Universal Corporation
|
2 | 2 | 2 | 2 | ||||||||||||
|
Cosan Finance
Limited
|
1 | 1 | 1 | 1 | ||||||||||||
|
Cosan
Combustíveis e Lubrificantes S.A.
|
431,480 | 431,474 | - | - | ||||||||||||
|
Cosanpar
Participações S.A.
|
- | - | 1,706,779,790 | 1,706,779,790 | ||||||||||||
|
Radar
Propriedades Agrícolas S.A.
|
19,909,260 | 3,766,620 | 18,026,602 | 3,410,633 | ||||||||||||
|
TEAS -
Terminal Exportador de Álcool de Santos S.A.
|
39,477,357 | 26,318,238 | 11,281,960 | 3,610,227 | ||||||||||||
|
Novo Rumo
Logística S.A.
|
278,336,920 | 80,216,699 | - | - | ||||||||||||
|
Cosan
Alimentos S.A.
|
112,166 | 112,163 | - | - | ||||||||||||
33
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
8.
|
Investments
(Continued)
|
On
March 31, 2010 and 2009, the account Investments showed the following
transactions:
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Opening
balances
|
4,788,932 | 1,954,588 | 278,209 | 120,312 | ||||||||||||
|
Equity
pickup
|
594,830 | (121,974 | ) | (18,645 | ) | 13,976 | ||||||||||
|
Investment
additions and advance for future capital increase
|
408,350 | 3,369,336 | 46,036 | 146,692 | ||||||||||||
|
Additions
resulting from merger/spin-off
|
334,172 | - | 2,769 | - | ||||||||||||
|
Consolidation
write-off
|
- | - | (19,051 | ) | - | |||||||||||
|
Investment
acquisition advancement write-off
|
- | - | (100,000 | ) | - | |||||||||||
|
Mirror effect
on the reversal of revaluation required by Law No. 11,638/07 and MP
449/08
|
- | (257,023 | ) | - | - | |||||||||||
|
Capital
payment investment write-off
|
(164,618 | ) | - | - | ||||||||||||
|
Others
|
(1,133 | ) | 8,623 | 3,805 | (2,771 | ) | ||||||||||
|
Final
balances
|
6,125,151 | 4,788,932 | 193,123 | 278,209 | ||||||||||||
Transactions occurred in the
year ended on March 31, 2010
Business combination with
Grupo Rezende Barbosa
|
|
a.
|
Novo Rumo Logística
S.A.
|
According to the
shareholders’ agreement executed on April 9, 2008, the port concessions and
assets for sugar export owned by the Company and by Rezende Barbosa S.A.
Administração e Participações (“Rezende Barbosa”) were concentrated on Novo Rumo
Logística S.A. (“Novo Rumo”), which is indirectly controlled by the
Company.
On
April 10, 2009 the Company and Rezende Barbosa, parent company of Grupo Nova
América integrated the port terminals of Cosan and Teaçu Armazéns Gerais S.A.
(“Teaçu”), a subsidiary of Rezende Barbosa. As a consequence of this operation,
which involved the payment of R$121,331 and the issuance of shares of Novo Rumo,
the Company acquired 100% of Teaçu, becoming the indirect holder of a 64.06%
interest of Rumo, and 28.82% remained held by Rezende Barbosa. This operation
resulted in a R$69,145 goodwill classified as Intangible assets.
In
addition, the capital reorganization resulted in a total net capital loss of
R$31,190, recorded in results for the year as Other operating income (expenses),
net.
34
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
8.
|
Investments
(Continued)
|
Transactions occurred in the
year ended on March 31, 2010 (Continued)
|
|
b.
|
Curupay Participações
S.A.
|
At
a Special General Meeting held on June 18, 2009 the Company’s shareholders
approved the acquisition of Curupay S.A. Participações (“Curupay”), then a
subsidiary of Rezende Barbosa, through the issuance of 44,300,389 common shares
for the equity amount of R$334,172, and whose market value on that date was
R$624,192.
Beginning that
date, the Company incorporated in its net asset the Curupay’s investments,
comprising (i) 28.82% interest in Novo Rumo, (ii) 100% direct interest in Nova
América S.A. Trading, and (iii) 100% direct and indirect interest in Cosan
Alimentos S.A. (“Cosan Alimentos”, previously known as Nova América S.A. –
Agroenergia) and subsidiaries. As a consequence of this transaction, the Company
increased to 92.88% its direct and indirect interest in Novo Rumo, generating
R$3,052 of capital gain, recorded in the results for the year as Other operating
income (expenses), net.
At
the closing of that operation, the Company recorded R$102,952 goodwill, arising
from the equity variation between the date of net assets calculation at book
value and the date of approval of Curupay’s merger by the Company shareholders
on June 18, 2009.
On
November 18, 2009, Cosan Alimentos absorbed with Nova América S.A.
Trading.
For purposes of
consolidation of Cosan Alimentos and Nova América S.A. Trading, the opening
balance taken into consideration was that of net assets adjusted to the
Company’s accounting practices on June 1, 2009.
Sale of aircraft fuel
business to Shell do Brasil Ltda.
On
June 17, 2009, Cosanpar sold to Shell the aviation fuel business, for R$115,601.
As a result of this operation, Cosanpar fully wrote off the cost of R$22,504,
generating a R$93,097 net gain on this transaction, recorded in the results for
the year as Other operating income (expenses), net (Note 19). Consequently, the
corresponding goodwill was recorded in the amount of R$85,589.
35
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
8.
|
Investments
(Continued)
|
Transactions occurred in the
year ended on March 31, 2010 (Continued)
Acquisition of
interest
a.
TEAS Santos Ethanol
Exporting Terminal (“TEAS”)
On
November 24, 2009, the Company acquired 10,527,295 common shares issued by TEAS
for R$20,002, increasing its interest by 26.67%, to 66.67% of the voting capital
of that company. As a result, the company recorded goodwill amounting to
R$7,301.
For purposes of
consolidation of TEAS, the opening balance was considered to be the
shareholders’ equity adjusted to the Company’s accounting practices on December
1, 2009.
b.
Logispot Armazéns
Gerais S.A. (“Logispot”)
On
November 12, 2009, Cosan, through its subsidiary Rumo Logística S.A. (“Rumo”),
acquired 166,590 common shares issued by Logispot, the equivalent to 14.28% of
Logispot's capital, for R$$19,992. Up to March 31, 2010, R$8,751 had been paid
in cash and the outstanding balance to be paid in 9 monthly, consecutive and
equal installments of R$1,249.
36
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
9.
|
Property,
plant and equipment
|
|
Parent
Company
|
||||||||||||||||||||
|
2010
|
2009
|
|||||||||||||||||||
|
Average
annual depreciation rates (%)
|
Cost
|
Accumulated
depreciation/
amortization
|
Net
|
Net
|
||||||||||||||||
|
Land and
rural properties
|
- | 59,591 | - | 59,591 | 59,591 | |||||||||||||||
|
Machinery,
equipment and installations
|
9.81 | 510,414 | (295,600 | ) | 214,814 | 202,237 | ||||||||||||||
|
Aircraft
|
10.00 | 13,395 | (12,935 | ) | 460 | 2,262 | ||||||||||||||
|
Vehicles
|
19.98 | 66,140 | (40,458 | ) | 25,682 | 29,281 | ||||||||||||||
|
Furniture,
fixtures and computer equipment
|
17.50 | 29,592 | (14,968 | ) | 14,624 | 9,689 | ||||||||||||||
|
Buildings and
improvements
|
4.00 | 173,525 | (33,538 | ) | 139,987 | 128,043 | ||||||||||||||
|
Construction
in progress
|
- | 101,344 | - | 101,344 | 68,758 | |||||||||||||||
|
Sugarcane
planting costs
|
20.00 | 455,617 | (222,407 | ) | 233,210 | 223,874 | ||||||||||||||
|
Parts and
components to be periodically replaced
|
100.00 | 82,410 | - | 82,410 | 65,524 | |||||||||||||||
| 1,492,028 | (619,906 | ) | 872,122 | 789,259 | ||||||||||||||||
|
Consolidated
|
||||||||||||||||||||
|
2010
|
2009
|
|||||||||||||||||||
|
Average
annual depreciation rates (%)
|
Cost
|
Accumulated
depreciation/
amortization
|
Net
|
Net
|
||||||||||||||||
|
Land and
rural properties
|
- | 210,429 | - | 210,429 | 201,046 | |||||||||||||||
|
Machinery,
equipment and installations
|
9.96 | 3,433,745 | (1,537,299 | ) | 1,896,446 | 791,189 | ||||||||||||||
|
Aircraft
|
10.00 | 18,086 | (13,091 | ) | 4,995 | 2,998 | ||||||||||||||
|
Vehicles
|
19.84 | 226,973 | (137,969 | ) | 89,004 | 86,403 | ||||||||||||||
|
Furniture,
fixtures and computer equipment
|
15.45 | 129,597 | (89,590 | ) | 40,007 | 31,010 | ||||||||||||||
|
Buildings and
improvements
|
4.17 | 1,007,806 | (293,218 | ) | 714,588 | 458,491 | ||||||||||||||
|
Construction
in progress
|
- | 1,408,252 | - | 1,408,252 | 881,561 | |||||||||||||||
|
Sugarcane
planting costs
|
20.00 | 1,422,813 | (672,962 | ) | 749,851 | 659,158 | ||||||||||||||
|
Parts and
components to be periodically replaced
|
100.00 | 245,178 | - | 245,178 | 146,641 | |||||||||||||||
|
Advances for
fixed asset purchases
|
- | 200,634 | - | 200,634 | 203,493 | |||||||||||||||
|
Others
|
- | 1,681 | - | 1,681 | 3,246 | |||||||||||||||
| 8,305,194 | (2,744,129 | ) | 5,561,065 | 3,465,236 | ||||||||||||||||
The consolidated
balance of construction in progress and advances for fixed asset purchases
corresponds, substantially, to (i) investments in co-generation capacity, (ii)
upgrading and expansion of industrial plants, (iii) expanding warehousing
capacity, and (iv) advances for purchases of wagons and
locomotives.
37
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
9.
|
Property, plant and equipment
(Continued)
|
On
March 31, 2010 and 2009, the Property, Plant and Equipment account showed the
following transactions:
|
Parent
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Opening
balances
|
789,259 | 847,625 | 3,465,236 | 2,743,036 | ||||||||||||
|
Additions to
the Property Plant and Equipment
|
288,295 | 202,001 | 1,921,001 | 1,345,537 | ||||||||||||
|
Write-offs
and transfers
|
(7,918 | ) | (15,750 | ) | (43,748 | ) | (7,667 | ) | ||||||||
|
Depreciation
and amortization
|
(197,514 | ) | (164,046 | ) | (595,401 | ) | (419,092 | ) | ||||||||
|
Revaluation
reversal – Law No. 11,638/07
|
- | (107,742 | ) | - | (320,034 | ) | ||||||||||
|
Leasing
transactions – CPC 06
|
- | 27,171 | - | 27,171 | ||||||||||||
|
Accretion
from mergers/acquisition
|
- | - | 792,812 | 303,118 | ||||||||||||
|
Accretion
from amalgamation
|
- | - | 21,165 | - | ||||||||||||
|
Spin-offs
|
- | - | - | (206,833 | ) | |||||||||||
|
Closing
balances
|
872,122 | 789,259 | 5,561,065 | 3,465,236 | ||||||||||||
|
10.
|
Intangible
|
|
Parent
Company
|
||||||||||||||||
|
2010
|
2009
|
|||||||||||||||
|
Goodwill (amortized on
a straight-line basis until March 31, 2009)
|
Cost
|
Accumulated
amortization
|
Net
|
Net
|
||||||||||||
|
Acquisition
of JVM Participações S.A.
|
63,720 | (53,100 | ) | 10,620 | 10,620 | |||||||||||
|
Acquisition
of Grupo Mundial
|
127,953 | (40,518 | ) | 87,435 | 87,435 | |||||||||||
|
Payment of
capital, Mundial
|
21,142 | (6,342 | ) | 14,800 | 14,800 | |||||||||||
|
Acquisition
of Corona (ABC 125 and ABC 126)
|
267,824 | (84,811 | ) | 183,013 | 183,013 | |||||||||||
|
Acquisition
of Usina Açucareira Bom Retiro S.A.
|
115,165 | (33,590 | ) | 81,575 | 81,575 | |||||||||||
| 595,804 | (218,361 | ) | 377,443 | 377,443 | ||||||||||||
|
Other
intangibles
|
||||||||||||||||
|
Software
(amortization at the rate of 20% p. a.)
|
46,001 | (23,796 | ) | 22,205 | 26,475 | |||||||||||
| 641,805 | (242,157 | ) | 399,648 | 403,918 | ||||||||||||
38
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
10.
|
Intangible
(Continued)
|
|
Consolidated
|
||||||||||||||||
|
2010
|
2009
|
|||||||||||||||
|
Goodwill (amortized on
a straight-line basis until March 31, 2009)
|
Cost
|
Accumulated
amortization
|
Net
|
Net
|
||||||||||||
|
Acquisition
of JVM Participações S.A.
|
63,720 | (53,100 | ) | 10,620 | 10,620 | |||||||||||
|
Acquisition
of Cosan Açúcar e Álcool
|
35,242 | (34,684 | ) | 558 | 558 | |||||||||||
|
Formation of
FBA
|
22,992 | (18,585 | ) | 4,407 | 4,407 | |||||||||||
|
Acquisition
of Univalem S.A. Açúcar e Álcool
|
24,118 | (19,100 | ) | 5,018 | 5,018 | |||||||||||
|
Acquisition
of Grupo Destivale
|
69,918 | (27,424 | ) | 42,494 | 42,494 | |||||||||||
|
Acquisition
of Grupo Mundial
|
127,953 | (40,518 | ) | 87,435 | 87,435 | |||||||||||
|
Payment of
capital, Mundial
|
21,142 | (6,342 | ) | 14,800 | 14,800 | |||||||||||
|
Acquisition
of Corona
|
818,831 | (255,815 | ) | 563,016 | 563,016 | |||||||||||
|
Acquisition
of Usina Açucareira Bom Retiro S.A.
|
115,165 | (33,590 | ) | 81,575 | 81,575 | |||||||||||
|
Acquisition
of Usina Santa Luíza
|
47,053 | (4,705 | ) | 42,348 | 42,348 | |||||||||||
|
Acquisition
of Benálcool
|
167,300 | (18,053 | ) | 149,247 | 149,247 | |||||||||||
|
Acquisition
of Aliança
|
1,860 | - | 1,860 | 1,860 | ||||||||||||
|
Acquisition
of Cosan CL (1)
|
1,513,091 | (134,395 | ) | 1,378,696 | 1,415,375 | |||||||||||
|
Acquisition
of Teaçu (2)
|
69,145 | - | 69,145 | - | ||||||||||||
|
Merger of
Curupay (Cosan Alimentos) (3)
|
102,952 | - | 102,952 | - | ||||||||||||
|
Acquisition
of Açúcar União (4)
|
74,832 | (57,371 | ) | 17,461 | - | |||||||||||
|
Acquisition
of Destilaria Paraguaçu (4)
|
166,656 | - | 166,656 | - | ||||||||||||
|
Subscription
of share of Nova América (4)
|
121,893 | - | 121,893 | - | ||||||||||||
|
Purchase of
shares of TEAS (5)
|
7,301 | - | 7,301 | - | ||||||||||||
| 3,571,164 | (703,682 | ) | 2,867,482 | 2,418,753 | ||||||||||||
|
Other
intangibles
|
||||||||||||||||
|
Software
(amortization at the rate of 20% p. a.)
|
77,309 | (48,058 | ) | 29,251 | 28,711 | |||||||||||
|
Others
|
7,315 | (2,740 | ) | 4,575 | - | |||||||||||
| 84,624 | (50,798 | ) | 33,826 | 28,711 | ||||||||||||
| 3,655,788 | (754,480 | ) | 2,901,308 | 2,447,464 | ||||||||||||
|
|
(1)
|
As mentioned
in Note 8, on June 17, 2009 Cosanpar sold to Shell its equity interest in
Jacta, fully realizing the R$85,589 goodwill on that
investment.
|
|
|
(2)
|
Goodwill
generated in the ports integration of groups Cosan and Rezende Barbosa,
described in note 8.
|
|
|
(3)
|
As mentioned
in Note 8, in the business combination between groups Cosan and Rezende
Barbosa, through the incorporation of Curupay, the Company recorded a
R$102,952 goodwill.
|
|
|
(4)
|
As mentioned
in Note 8, goodwill incorporated on business
combination.
|
|
|
(5)
|
Goodwill from
shareholding increase, as per Note
8.
|
As
of March 31, 2010 and 2009, the Intangibles account showed the following
transactions:
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Opening
balances
|
403,918 | 471,160 | 2,447,464 | 1,193,931 | ||||||||||||
|
Accretion to
goodwill
|
- | - | 228,310 | 1,461,838 | ||||||||||||
|
Increase in
software and other intangibles
|
4,526 | 582 | 5,122 | 581 | ||||||||||||
|
Accretion
from mergers/acquisition
|
- | - | 320,456 | 2,933 | ||||||||||||
|
Goodwill
derived from disposals
|
- | - | (85,589 | ) | - | |||||||||||
|
Amortization
of software and other intangibles
|
(8,796 | ) | (7,368 | ) | (12,455 | ) | (8,065 | ) | ||||||||
|
Goodwill
amortization
|
- | (60,456 | ) | - | (196,467 | ) | ||||||||||
|
Others
|
- | - | (2,000 | ) | (7,287 | ) | ||||||||||
|
Closing
balances
|
399,648 | 403,918 | 2,901,308 | 2,447,464 | ||||||||||||
39
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
11.
|
Taxes
and social contributions payable
|
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
ICMS – State
VAT
|
8,865 | 5,566 | 49,197 | 24,847 | ||||||||||||
|
IPI
|
886 | 117 | 6,379 | 25,776 | ||||||||||||
|
INSS – Social
Security
|
6,933 | 5,922 | 23,891 | 20,376 | ||||||||||||
|
PIS – Social
Integration Program
|
1,120 | 2,826 | 8,129 | 6,113 | ||||||||||||
|
COFINS –
Social Security Financing
|
5,153 | 12,808 | 32,076 | 23,492 | ||||||||||||
|
Installment
payments – Refis IV
|
97,703 | - | 665,470 | |||||||||||||
|
Tax Recovery
Program – REFIS (1)
|
- | - | - | 273,507 | ||||||||||||
|
Special Tax
Payment Program – PAES (1)
|
- | 50,906 | 409 | 69,813 | ||||||||||||
|
Income and
social contribution taxes payable
|
- | 8,216 | 2,597 | 41,099 | ||||||||||||
|
Other
|
9,618 | 5,125 | 21,219 | 12,333 | ||||||||||||
| 130,278 | 91,486 | 809,367 | 497,356 | |||||||||||||
|
Current
liabilities
|
(42,633 | ) | (36,076 | ) | (215,862 | ) | (168,596 | ) | ||||||||
|
Noncurrent
liabilities
|
87,645 | 55,410 | 593,505 | 328,760 | ||||||||||||
|
|
(1)
|
All tax
repayment arrangements under REFIS and PAES were included in the Refis IV
repayment plan, save for repayment arrangements related to the education
allowance charge.
|
Noncurrent amounts
will become due as follows:
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
13 to 24
months
|
11,732 | 16,143 | 60,349 | 44,549 | ||||||||||||
|
25 to 36
months
|
9,326 | 15,460 | 57,933 | 43,409 | ||||||||||||
|
37 to 48
months
|
6,525 | 14,704 | 54,991 | 42,644 | ||||||||||||
|
49 to 60
months
|
6,169 | 4,314 | 51,241 | 28,837 | ||||||||||||
|
61 to 72
months
|
6,043 | 1,005 | 51,026 | 24,067 | ||||||||||||
|
73 to 84
months
|
5,521 | 1,005 | 44,303 | 24,067 | ||||||||||||
|
85 to 96
months
|
5,521 | 1,005 | 38,911 | 24,067 | ||||||||||||
|
Thereafter
|
36,808 | 1,774 | 234,751 | 97,120 | ||||||||||||
| 87,645 | 55,410 | 593,505 | 328,760 | |||||||||||||
|
|
Tax debt installments
– Law No 11.941/09 and MP 470/09 (“Refis
IV”)
|
During the year
ended March 31, 2010, the Company and its subsidiaries Cosan Açúcar e Álcool,
Cosan Alimentos S.A., Bonfim Nova Tamoio – BNT Agrícola Ltda., Benalcool Açúcar
e Álcool S.A. and Administração de Participações Aguassanta Ltda. opted for the
payment in installments of Refis IV.
40
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
11.
|
Taxes and social contributions
payable (Continued)
|
The effects of that
installment option are as follows:
|
2010
|
||||||||
|
Parent
Company
|
Consolidated
|
|||||||
|
Balance of
taxes payable and contingencies, restated before Refis IV
|
365,512 | 1,600,767 | ||||||
|
Statutory
reductions
|
(174,523 | ) | (620,865 | ) | ||||
|
Net
amount of taxes eligible for Refis IV repayments
|
190,989 | 979,902 | ||||||
|
Amount of
taxes payable, court deposits and contingencies accounted for before Refis
IV
|
(268,822 | ) | (1,250,235 | ) | ||||
|
Net
result of Refis IV (1)
|
(77,833 | ) | (270,333 | ) | ||||
|
Net amount of
taxes eligible for Refis IV repayments
|
190,989 | 979,902 | ||||||
|
Amortization
of court deposits
|
(7,749 | ) | (100,841 | ) | ||||
|
Tax loss and
CSLL negative basis carryforwards
|
(85,553 | ) | (203,903 | ) | ||||
|
Repayments
made after enrollment in the program
|
(2,967 | ) | (29,286 | ) | ||||
|
Inflation
adjustment
|
2,983 | 19,598 | ||||||
|
Balance
due as of March 31, 2010
|
97,703 | 665,470 | ||||||
(1) Classified to
the income for the year as Other operating revenues, net (Note 19).
The Company and its
subsidiaries must comply with several conditions to continue benefiting from the
installment payment programs, particularly with the regular payment of the
installments as required by law.
General
considerations
Under the
self-assessment tax system adopted in Brazil, income tax returns filed may be
audited by tax authorities for a period of five years from their
filling.
41
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
12.
|
Income
and social contribution taxes
|
|
|
a)
|
Reconciliation of
income and social contribution tax
expenses:
|
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Operating
profit (loss) before income tax and social security
contribution
|
1,195,576 | (632,096 | ) | 1,412,869 | (709,061 | ) | ||||||||||
|
Income tax
and social security contribution at nominal rate (34%)
|
(406,496 | ) | 214,913 | (480,375 | ) | 241,081 | ||||||||||
|
Adjustments
made for determining the effective rate:
|
||||||||||||||||
|
Equity
pickup
|
202,242 | (41,471 | ) | (6,339 | ) | 4,752 | ||||||||||
|
Amortization
of non-deductible goodwill
|
- | (2,087 | ) | - | (5,187 | ) | ||||||||||
|
Non-deductible
donations and contributions
|
(2,212 | ) | (1,765 | ) | (4,167 | ) | (2,484 | ) | ||||||||
|
Capital loss
from business combinations, net of gains
|
1,038 | - | (9,567 | ) | - | |||||||||||
|
Tax
implications from joining the repayment program established by Refis
IV
|
1,161 | - | 59,038 | - | ||||||||||||
|
Recognized
granted options
|
(3,050 | ) | (3,901 | ) | (3,050 | ) | (3,901 | ) | ||||||||
|
Others
|
(1,764 | ) | (7,429 | ) | 10,625 | 405 | ||||||||||
|
Total of
deferred and current taxes
|
(209,081 | ) | 158,260 | (433,835 | ) | 234,666 | ||||||||||
|
Effective
rate
|
17.49 | % | - | 30.71 | % | - | ||||||||||
|
|
b)
|
Deferred income and
social contribution tax assets and
liabilities:
|
|
Parent
Company
|
||||||||||||||||||||
|
2010
|
2009
|
|||||||||||||||||||
|
Base
|
IRPJ
25%
|
CSSL
9%
|
Total
|
Total
|
||||||||||||||||
|
Provisions
for court judgments and other interim differences
|
147,597 | 36,899 | 13,284 | 50,183 | 61,555 | |||||||||||||||
|
Tax
implications of Law No. 11,638/07
|
- | - | - | - | 15,034 | |||||||||||||||
|
Tax
losses
|
331,510 | 82,878 | - | 82,878 | 117,730 | |||||||||||||||
|
Social
security contribution negative basis
|
331,612 | - | 29,845 | 29,845 | 42,391 | |||||||||||||||
| 119,777 | 43,129 | 162,906 | 236,710 | |||||||||||||||||
|
Exchange
variation
|
(447,648 | ) | (112,000 | ) | (40,320 | ) | (152,320 | ) | - | |||||||||||
|
Tax
implications of Law No. 11,638/07
|
(144,110 | ) | (36,027 | ) | (12,970 | ) | (48,997 | ) | - | |||||||||||
|
Goodwill
|
(57,000 | ) | (14,250 | ) | (5,130 | ) | (19,380 | ) | - | |||||||||||
| (162,277 | ) | (58,420 | ) | (220,697 | ) | - | ||||||||||||||
|
Total
deferred taxes
|
(42,500 | ) | (15,291 | ) | (57,791 | ) | 236,710 | |||||||||||||
|
Current
assets
|
12,680 | - | ||||||||||||||||||
|
Non-current
assets
|
150,226 | 236,710 | ||||||||||||||||||
|
Non-current
liabilities
|
(220,697 | ) | - | |||||||||||||||||
42
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
12.
|
Income and social contribution
taxes (Continued)
|
|
Consolidated
|
||||||||||||||||||||
|
2010
|
2009
|
|||||||||||||||||||
|
Base
|
IRPJ
25%
|
CSSL
9%
|
Total
|
Total
|
||||||||||||||||
|
Provisions
for court judgments and other interim differences
|
999,084 | 249,771 | 89,918 | 339,689 | 442,064 | |||||||||||||||
|
Tax
implications of Law No. 11,638/07
|
- | - | - | - | 15,034 | |||||||||||||||
|
Tax
losses
|
869,441 | 217,360 | - | 217,360 | 209,859 | |||||||||||||||
|
Social
security contribution negative basis
|
881,932 | - | 79,375 | 79,375 | 75,558 | |||||||||||||||
| 467,131 | 169,293 | 636,424 | 742,515 | |||||||||||||||||
|
Exchange
variation
|
(539,554 | ) | (134,889 | ) | (48,560 | ) | (183,449 | ) | - | |||||||||||
|
Tax
implications of Law No. 11,638/07
|
(144,110 | ) | (36,028 | ) | (12,970 | ) | (48,998 | ) | - | |||||||||||
|
Goodwill
|
(335,741 | ) | (83,935 | ) | (30,217 | ) | (114,152 | ) | - | |||||||||||
| (254,852 | ) | (91,747 | ) | (346,599 | ) | - | ||||||||||||||
|
Total
deferred taxes
|
212,279 | 77,546 | 289,825 | 742,515 | ||||||||||||||||
|
Current
assets
|
76,310 | 42,471 | ||||||||||||||||||
|
Non-current
assets
|
560,114 | 700,044 | ||||||||||||||||||
|
Non-current
liabilities
|
(346,599 | ) | - | |||||||||||||||||
Deferred income and
social contribution tax on accumulated loss must be realized within 10 years,
according to the Company’s and its subsidiaries’ expected profitability shown in
financial projections prepared by management.
The Company expects
to realize non-current tax credits and debts in the course of the following
years:
|
Assets
|
||||||||||||||||
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
2011
|
- | 2,168 | - | 33,484 | ||||||||||||
|
2012
|
10,622 | 25,462 | 84,818 | 76,119 | ||||||||||||
|
2013
|
16,409 | 53,894 | 93,328 | 130,318 | ||||||||||||
|
2014
|
16,340 | 75,281 | 68,303 | 174,995 | ||||||||||||
|
2015 to
2017
|
84,688 | 64,806 | 194,445 | 192,627 | ||||||||||||
|
2018 to
2019
|
22,167 | 15,099 | 119,220 | 92,501 | ||||||||||||
| 150,226 | 236,710 | 560,114 | 700,044 | |||||||||||||
|
Liabilities
|
||||||||||||||||
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
2012
|
20,132 | - | 23,245 | - | ||||||||||||
|
2013
|
20,132 | - | 23,245 | - | ||||||||||||
|
2014
|
20,132 | - | 23,245 | - | ||||||||||||
|
2015 to
2017
|
60,394 | - | 69,733 | - | ||||||||||||
|
2018 to
2019
|
99,907 | - | 207,131 | - | ||||||||||||
| 220,697 | - | 346,599 | - | |||||||||||||
Tax credit recovery
estimates were based on taxable profit projections, taking into consideration
several financial and business assumptions on the balance sheet preparation
date.
43
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
13.
|
Loans
and financing
|
|
Description
|
Financial
charges (1)
|
Parent
Company
|
Consolidated
|
Final
maturity
date
|
Guarantees
(2)
|
||||||||||||
|
Index
|
Annual
average interest rate
|
2010
|
2009
|
2010
|
2009
|
2010
|
2009
|
||||||||||
|
Senior
notes due 2009
|
U.S
dollar
|
Interest @
9.0%
|
-
|
86,456
|
-
|
86,456
|
Nov
2009
|
-
|
-
|
||||||||
|
Senior
notes due 2014
|
U.S
dollar
|
Interest @
9.5%
|
-
|
-
|
631,246
|
-
|
Aug
2014
|
-
|
-
|
||||||||
|
Senior
notes due 2017
|
U.S
dollar
|
Interest @
7.0%
|
-
|
-
|
720,573
|
936,704
|
Feb
2017
|
-
|
-
|
||||||||
|
Trade-related
promissory notes
|
DI – Interbank
deposits
|
Interest @
3%
|
-
|
1,161,971
|
-
|
1,161,971
|
Nov
2009
|
Conditional
sale
|
Conditional
sale
|
||||||||
|
BNDES
(3)
|
URTJLP
|
Interest @
3.6%
|
-
|
-
|
1,057,775
|
230,504
|
Oct
2025
Mar
2018
Apr
2018
Apr
2015
Nov
2012
Jan
2013
Oct
2012
|
Credit
rights from PPA
|
Credit rights
from PPA
|
||||||||
|
Bank credit
certificate
|
CDI
|
Interest @
0.6%
|
-
|
-
|
61,444
|
-
|
Dec
2011
|
Statutory
lien
|
-
|
||||||||
|
Advance
against exchange contract
|
U.S
dollar
|
Interest @
2.1%
|
296,375
|
143,250
|
296,375
|
143,250
|
Mar
2010
|
-
|
-
|
||||||||
|
Bonuses in
perpetuity
IFC
|
U.S
dollar
U.S
dollar
|
Interest @
8.3%
Interest @
7.4%
|
810,896
-
|
1,054,119
114,323
|
810,896
-
|
1,054,119
114,323
|
-
-
|
-
-
|
-
Conditional
sale
|
||||||||
|
Statement No.
2,471
|
IGP-M
Fixed
|
Interest @
3.9%
Interest @
3.0%
|
99,493
121
|
97,642
129
|
603,504
121
|
579,856
129
|
Dec
2020
Oct
2025
|
Treasury
certificates and mortgaged lands
|
Treasury
certificates and mortgaged lands
|
||||||||
|
Pre-payments
|
U.S. dollar +
Libor
|
Interest @
6.2%
|
537,390
|
-
|
980,533
|
-
|
Sep
2014
|
-
|
-
|
||||||||
|
Credit
note
|
123.4%
CDI
U.S
dollar
|
-
Interest @
6.2%
|
311,916
182,831
|
-
|
378,748
182,831
|
-
|
Oct
2012
|
-
|
-
|
||||||||
|
Finame
|
Fixed
URTJLP
U.S
dollar
|
Interest @
4.6%
Interest @
3.8%
Interest @
3.3%
|
225
20,162
-
|
1,014
20,070
-
|
106,255
94,775
84
|
1,014
43,653
-
|
Jan
2022
Mar
2018
Nov
2012
|
Statutory
lien on purchased assets
|
Statutory lien
on purchased assets
|
||||||||
|
Others
|
Sundry
|
Sundry
|
-
|
-
|
56,286
|
25,333
|
Sundry
|
Mortgage,
inventories and statutory lien on purchased assets
|
Mortgage,
inventories and statutory lien on purchased assets
|
||||||||
|
Expenses
incurred with security placement
|
(18,488
|
) |
(21,757
|
) |
(44,014
|
) |
(42,352)
|
-
|
-
|
-
|
|||||||
|
2,240,921
|
2,657,217
|
5,937,431
|
4,334,960
|
||||||||||||||
|
Current
|
(500,142
|
) |
(1,419,451
|
) |
(800,902
|
) |
(1,449,504)
|
||||||||||
|
Non-current
|
1,740,779
|
1,237,766
|
5,136,529
|
2,885,456
|
|||||||||||||
|
(1)
|
Financial
charges as of March 31, 2010, except as indicated
otherwise;
|
|
(2)
|
All loans and
financings are secured by promissory notes and sureties posted by the
Company, its subsidiaries and controlling shareholders, in addition to the
collateral described above; and
|
|
(3)
|
These
correspond to funds secured by direct and indirect subsidiaries, Cosan
S.A. Bioenergia, Barra Bioenergia S.A. and Cosan Centroeste S.A. Açúcar e
Álcool, for the purpose of financing cogeneration and greenfield
projects.
|
44
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
13.
|
Loans and financing
(Continued)
|
Noncurrent loans,
net of transaction costs amortization, have the following scheduled
maturities:
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
13 to 24
months
|
333,679 | 16,029 | 612,101 | 42,322 | ||||||||||||
|
25 to 36
months
|
510,570 | 23,401 | 748,966 | 49,799 | ||||||||||||
|
37 to 48
months
|
33 | 58,129 | 235,191 | 83,140 | ||||||||||||
|
49 to 60
months
|
26 | 2,058 | 849,737 | 23,882 | ||||||||||||
|
61 to 72
months
|
8 | 8 | 113,057 | 19,447 | ||||||||||||
|
73 to 84
months
|
8 | 8 | 825,623 | 16,676 | ||||||||||||
|
85 to 96
months
|
8 | 8 | 109,472 | 943,421 | ||||||||||||
|
Thereafter
|
896,447 | 1,138,125 | 1,642,382 | 1,706,769 | ||||||||||||
| 1,740,779 | 1,237,766 | 5,136,529 | 2,885,456 | |||||||||||||
Resolution No.
2471
From 1998 to 2000,
the Company and its subsidiaries renegotiated their debt related to agricultural
funding with several financial institutions, thereby reducing their financial
cost to annual interest rates below 10% and guaranteeing the amortization of the
updated principal amount with the assignment and transfer of CTNs - Restricted
Brazilian Treasury Bills redeemable on the debt maturity dates, using the tax
incentive introduced by Resolution No. 2471, issued by the Central Bank of
Brazil on February 26, 1998. On March 31, 2010, these certificates, classified
as noncurrent assets, amounted to R$31,234 (R$27,356 in 2009), at the Company,
and R$205,657 (R$177,626 in 2009) at consolidated. Payments pursuant to such
certificates are remunerated based on the IGP-M variation plus annual interest
of 12%. Upon payment of the debt, the redemption value should be similar to the
amount of the renegotiated debt. Interest referring to these financings is paid
annually and principal is to be entirely settled in 2020 at the Company, and in
2025 at consolidated.
Senior Notes due in
2017
On
January 26, 2007, wholly-owned subsidiary Cosan Finance Limited issued Senior
Notes in the international capital markets under Rule 144A and Regulation S of
the U.S. Securities Act of 1933, in the amount of US$400 million. These Senior
Notes bear interest at a rate of 7% per annum, payable semi-annually in February
and August of each year.
45
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
13.
|
Loans and financing
(Continued)
|
Perpetual
Notes
On January, 24 and February 10, 2006, the Company issued
perpetual notes in the international market in accordance with
Regulations S and Rule 144A, in the amount of US$450 million for qualified institutional investors.
Perpetual notes are listed in the Luxemburg Stock Exchange - EURO MTF and
bear interest of 8.25% per year, payable quarterly on the 15th of May, August,
November and February of each year, beginning May 15, 2006. These notes may, at
the discretion of the Company, be redeemed as from February 15, 2011 on any
interest payment date, for their face value. Perpetual notes are secured by the Company
and Cosan Açúcar e Álcool.
Commercial Promissory
Notes
On
November 17, 2008, the Company issued 44 nominal promissory notes of a single
series at the price of R$25,000 each, whose offering reached
R$1,100,000.
On
November 12, 2009, the Company made the complete payment of this financing
facility, totaling R$1,249,745.
Senior Notes due in
2014
On
August 4, 2009, the indirect subsidiary CCL Finance Limited issued US$350,000 of
Senior Notes in the international capital markets according to Regulations S and
144A that bear interest at a rate of 9.5% per annum, payable semi-annually in
February and August of each year, from February 2010.
Advance Against Exchange
Agreements and Credit Note
Certain advances
against exchange agreements and credit notes were taken out from several banking
institutions and will be settled against export proceeds over 2012. These
transactions bear interest at rates that vary between 2.1% and 6.2% per annum,
payable semi annually at each maturity date.
Finame
This refers to
loans associated with the financing of machinery and equipment (FINAME –
Financiamento de Máquinas e Equipamentos) obtained from several financial
institutions. These loans are intended to fund capital expenditures. These loans
bear interest at rates that vary between 3.0% to 5.0% per annum, payable
monthly, and are secured by statutory liens on the purchased
assets.
46
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
13.
|
Loans and financing
(Continued)
|
Advanced
payments
During the year
ended March 31, 2010, the Company and its subsidiary Cosan Alimentos S.A. funded
R$924,327, the equivalent to US$530,000 thousand as advances for future
sugar exports to the settled in 2012 and 2014. Exchange rate variation and
annual interests based on the Libor rate, plus 6.2% spread p.a. are levied over
these advances.
Restrictive covenants in
loan and financing agreements
The Company and its
subsidiaries are subject to certain restrictive covenants contained in loan and
financing agreements, based on certain financial indicators ascertained on a
monthly basis.
Restrictive
covenants have been met by the Company and its subsidiaries.
|
14.
|
Provision
for judicial demands
|
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Tax
issues
|
40,144 | 226,805 | 397,051 | 1,121,338 | ||||||||||||
|
Civil and
labor
|
37,044 | 22,905 | 214,932 | 155,827 | ||||||||||||
| 77,188 | 249,710 | 611,983 | 1,277,165 | |||||||||||||
|
Court
deposits
|
(5,632 | ) | (13,077 | ) | (167,562 | ) | (171,266 | ) | ||||||||
| 71,556 | 236,633 | 444,421 | 1,105,899 | |||||||||||||
|
Opening
balances
|
236,633 | 196,997 | 1,105,899 | 832,425 | ||||||||||||
|
Formation
(reversal) and transfers, net
|
(175,762 | ) | 24,991 | (729,455 | ) | 15,074 | ||||||||||
|
Inflation
adjustment
|
10,685 | 14,645 | 41,696 | 56,792 | ||||||||||||
|
Accretion
from acquisitions, net of write-offs
|
- | - | 26,281 | 201,608 | ||||||||||||
|
Closing
balances
|
71,556 | 236,633 | 444,421 | 1,105,899 | ||||||||||||
The Company and its
subsidiaries are party to various ongoing labor claims, civil and tax
proceedings arising from the normal course of their business.
Respective
provisions for judicial demands were recorded considering those cases in which
the likelihood of loss has been rated as probable based on the opinion of legal
advisors. Management believes resolution of these disputes will have no effect
significantly different than the estimated amounts accrued.
47
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
14.
|
Provision for judicial
demands (Continued)
|
Court proceedings deemed as
probable losses
The main tax judicial demands at March 31, 2010, are as
follows:
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
Description
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
IPI excise
tax stimulus credit (i)
|
- | 146,886 | - | 269,157 | ||||||||||||
|
IPI credits
from non-taxable (NT) products (i)
|
- | - | - | 92,722 | ||||||||||||
|
Contribution
to the IAA (i)
|
- | - | - | 84,904 | ||||||||||||
|
IPI
(i)
|
6,290 | 9,534 | 8,357 | 54,699 | ||||||||||||
|
PIS and
Cofins (ii)
|
4,297 | 17,334 | 21,212 | 144,830 | ||||||||||||
|
IPC – 89
(iii)
|
- | - | 86,503 | 81,546 | ||||||||||||
|
Finsocial
offsetting (iv)
|
- | - | 172,960 | 163,668 | ||||||||||||
|
ICMS
credits
|
16,553 | 14,718 | 60,240 | 46,226 | ||||||||||||
|
IRPJ and
CSLL
|
789 | 5,381 | 789 | 43,463 | ||||||||||||
|
Others
|
12,215 | 32,952 | 46,990 | 140,123 | ||||||||||||
| 40,144 | 226,805 | 397,051 | 1,121,338 | |||||||||||||
(i) As presented in
Note 11, during the quarter ended March 31, 2010, the Company and its
subsidiaries Cosan Alimentos, Cosan Açúcar e Álcool, Bonfim Nova Tamoio – BNT
Agrícola Ltda., Benalcool Açúcar e Álcool S.A. and Administração de
Participações Aguassanta Ltda. opted for the payment in installments of Refis
IV, related to ongoing legal demands involving undue use of IPI credit premium
and other federal taxes. In addition, the Company and its subsidiaries utilize
accumulated tax losses to pay these demands and the fines and interest thereof.
Subsequently, the claims related to the remaining credit premium - IPI were
fully paid for in installments, as well as installments of other federal taxes,
which were recorded under taxes and contributions payable.
(ii) On May 27, 2009, the paragraph 1st and 3rd of Law
No 9718/98 that regulated the collection of PIS and Cofins (federal tax
contributions) on exchange variation and other financial income was revoked by
Refis IV. The Company has evaluated its ongoing judicial demands related to the
legal obligations not paid related to the increase of calculation basis of PIS
and Cofins, confirming the absence of errors or flaws in the ongoing demands,
reason why on March 31, 2010, the Company reversed the provision for
accounting for the respective legal liabilities in its financial statements in
the amount of R$53,810.
48
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
14.
|
Provision for judicial
demands (Continued)
|
(iii) In 1993
subsidiary Cosan CL filed a suit to challenge the balance sheet restatement
index (IPC) established by the federal government in 1989, which index did not
reflect the actual inflation back then. The use of this index caused the Company
to supposedly overstate and overpay the IRPJ and CSLL. Cosan CL obtained a
favorable preliminary order that allowed it to recalculate the balance sheet
restatement, now using indexes that accurately measured the inflation over the
relevant period. In doing so the company rectified the amounts of IRPJ and CSLL
payable. Identified overpayments for both taxes were offset in subsequent years
until 1997, when the balance was zeroed. Despite the favorable court rulings,
tax authorities issued a notice of infringement to the Company challenging all
tax offsets performed in 1993 and some offsets in 1994 and 1997. Given the
contingent nature of this tax offsetting, associated amounts were also recorded
as a provision for court rulings and have been restated against the variation of
the SELIC rate.
(iv) From June
through December 1994, subsidiary Conan CL offset COFINS and several other taxes
with previously paid amounts of FINSOCIAL. This offsetting was backed in a
preliminary order issued by a court of competent jurisdiction in a suit brought
to challenge the constitutionality of FINSOCIAL.
In
1995 Cosan CL was declared exempt from COFINS levies. Thus, the company
understood that past offsets of COFINS against FINSOCIAL were not in order and
in 2003, based on another favorable court ruling relative to FINSOCIAL,
concluded that FINSOCIAL credits previously offset against CONFINS were once
again available to be offset against other tax liabilities. The Company then
offset these credits against IRPJ, CSLL, CIDE, PIS, COFINS and IRRF resulting
from its operations. Once again, because of the contingent nature of this
procedure the Company recorded the full offset amount as a provision for court
rulings until the Federal Revenue Service ratified this
offsetting.
In
2008 the Federal Revenue Service dismissed the offsetting performed on the
ground that Cosan CL had already used the tax credits to offset COFINS back in
1994. In view of this understanding, the management of the Company decided to
challenge the administrative decisions, which is pending judgment at the
Taxpayers' Council. The amount recorded as provision for court ruling has been
restated against the SELIC rate.
49
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
14.
|
Provision for judicial
demands (Continued)
|
Court proceedings deemed as
possible losses
As
regards tax, labor and civil claims whose likelihood of unfavorable outcome is
rated as possible, and, as a consequence no provision for lawsuits was recorded
in the financial statements, are as follows:
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Notice of
infringement – Income tax withheld at source (i)
|
182,824 | 161,440 | 182,824 | 161,440 | ||||||||||||
|
ICMS – State
VAT (ii)
|
33,550 | 9,460 | 322,340 | 178,390 | ||||||||||||
|
IPI – Federal
VAT (iii)
|
10,617 | 15,539 | 263,597 | 75,667 | ||||||||||||
|
Offsets
against IPI credits – IN 67/98 (iv)
|
- | - | 174,867 | 157,525 | ||||||||||||
|
IAA – Sugar
and Ethanol Institute
|
- | - | 2,544 | 73,184 | ||||||||||||
|
INSS
|
- | 11 | 4,061 | 1,839 | ||||||||||||
|
PIS/Cofins
|
12,078 | 11,023 | 143,556 | 35,953 | ||||||||||||
|
Civil and
labor (v)
|
74,695 | 38,401 | 490,493 | 219,016 | ||||||||||||
|
Others
|
33,636 | 30,306 | 117,784 | 80,686 | ||||||||||||
| 347,400 | 266,180 | 1,702,066 | 983,700 | |||||||||||||
|
|
(i)
|
Notice of
infringement – Income tax withheld at
source
|
In
September 2006 the Federal Revenue Service served another notice of infringement
on the Company, this time for failure to withhold and pay income tax at source
on capital gains derived from the acquisition of a subsidiary company. This
notice of infringement led to an administrative proceeding which is deemed a
likely loss in the opinion of the Company's legal counsels, the amount of which
was not recorded as a provision in the Company's financial
statements.
|
|
(ii)
|
ICMS - Tax on
the Circulation of Goods and Transportation
Services
|
|
|
This refers
essentially to (a) a notice of infringement served on account of an
alleged failure to pay ICMS and perform ancillary duties relative to
agricultural partnership operations and processing activities outsourced
to Central Paulista Açúcar e Álcool Ltda., from May through December 2006,
and May through December 2007; (b) ICMS levied on granulated sugar exports
which were deemed semi-processed commodities by the tax agent in charge of
this assessment, and as such subject to be levied by the ICMS pursuant to
the applicable regulation.
|
50
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
14.
|
Provision for judicial
demands (Continued)
|
|
(iii)
|
IPI – Excise
Tax on Manufactured Goods
|
|
|
IPI as per
Normative Instruction No. 67/98: Normative Instruction SRF No. 67/98
validated a procedure whereby manufacturing plants sold several types of
cane sugar, including demerara, higher refined, special refined, special
extra refined and granulated refined sugars, without assessing and paying
IPI from July 6, 1995 through November 16, 1997, as well as amorphous
refined sugar sales from January 14, 1992 through November 16, 1997. This
instruction was applied to the relevant proceedings initiated by the
Federal Revenue Service, which are deemed as likely losses in the opinion
of the Company's legal counsels.
|
|
(iv)
|
Offsets
against IPI credits – IN
67/98
|
|
|
Normative
Instruction SRF No. 67/98 made it possible to obtain refund of IPI tax
payments for sales of refined amorphous sugar from January 14, 1992
through November 16, 1997. In view of this rule, Cosan Açúcar and Álcool
applied for offsetting amounts paid during the relevant periods against
other tax liabilities of its own. However, the Federal Revenue Service
denied its application for both reimbursement and offsetting of such
amounts. Cosan Açúcar and Álcool challenged this ruling in an
administrative proceeding.
|
|
|
Upon being
notified to pay tax debts resulting from offset transactions in light of
certain changes introduced by IN SRF No. 210/02, subsidiary Cosan Açúcar
and Álcool filed a writ of mandamus and applied for a preliminary
injunction seeking to stay enforceability of offset taxes, in an attempt
to prevent the tax authorities from demanding the relevant tax debts in
court. The preliminary injunction was granted by the competent court. The
legal counsel in charge of this suit has deemed it a likely
loss.
|
The amount offset,
duly restated as of March 31, 2010, is R$162,928 (R$157,525 at April 30, 2009).
Likewise, subsidiary Cosan Alimentos S.A., formerly Nova América S.A.
Agroenergia, holds a similar claim against the Federal Revenue Service in the
amount of R$11,939, duly restated as of March 31, 2010. In view of
the opinion of its legal counsels, the management of the Company has seen fit
not to establish an accounting provision for the amounts involved in this
lawsuit.
51
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
14.
|
Provision for judicial
demands (Continued)
|
|
(v)
|
Civil and
labor
|
The Company and its
subsidiaries are party in several civil and labor claims resulting from the
normal course of its activities. On March 31, 2010, out of the total amount,
R$35,653 (R$25,993 in 2009) in the parent company and R$235,010 (R$145,936 in
2009) in the consolidated represent civil claims and R$39,042 (R$12,408 in 2009)
in the parent company and R$255,483 (R$73,080 in 2009) in the consolidated
represent labor claims.
|
15.
|
Accounts
receivable from federal government
|
On
February 28, 2007, subsidiary Cosan Açúcar e Álcool recognized gain of
R$318,358, corresponding to a lawsuit filed against federal government claiming
indemnification for damages since prices of its products, at the time the sector
was subject to government control, were imposed not observing the prevailing
reality of the sector created by government control itself. A final decision in
favor of the subsidiary was handed down. The gain was recorded in the statement
of operations for the year, the contra entry being to noncurrent assets of the
Company, in receivables from federal government.
The Company awaits
a final ruling on the manner of payment. This payment will be effected in the
form of court-mandated government bonds which, once issued, will be settled
within 10 years.
As
of March 31, 2010, the assets reported relative to the suit for loss and damages
and related provision for attorney's fees amounted to R$333,733 and R$40,048
(R$323,433 and R$38,812 in 2009), respectively.
Subsidiary Cosan
Açúcar e Álcool has other claims for damages of this nature filed against the
Federal Government, which are not recognized in accounting since these still
represent contingent assets.
52
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
16.
|
Shareholders’
equity
|
|
a)
|
Capital
|
As
explained in Note 8, on June 18, 2009, the shareholders convened at
extraordinary general meeting resolved to increase the Company's capital stock
in the amount of R$334,172 by issuing 44,300,389 new registered, book-entry
shares of common stock without par value, at the issue price of R$7.54 per
share, as a result of the merger with Curupay. In view of the issue of new
shares, the capital stock of the Company increased to R$4,153,942, divided into
372,585,273 registered, book-entry shares of common stock at no par
value.
On
July 15, 2009, the directors convened at a meeting of the Board resolved to
increase the capital stock in the amount of R$1,374 through issue of 224,819 new
book-entry, registered shares of common stock without par value under the
Company's Stock Option Plan. This new issue reflected the exercise of options by
eligible officers at the strike price of R$6.11 per share as established in the
stock plan. In view of the issue of new shares, the capital stock of the Company
increased to R$4,155,316, divided into 372,810,092 registered, book-entry shares
of common stock at no par value.
Additionally, at a
meeting convened on August 7, 2009, the Board of Directors approved a further
capital increase in the amount of R$800 (eight hundred reais) through issue of
50 new shares of common stock of the Company, at the issue price of R$16,
reflecting the exercise of shareholder bonus subscription rights, pursuant to a
resolution adopted by the Board of Directors at a meeting held on September 19,
2008. As a result of this capital increase, the Company's capital stock changed
to R$4,155,316, duly within the authorized capital limit set forth in article 6
of the Company's by-laws. As a result, the capital stock of the Company changed
to 372,810,142 registered, book-entry shares of common stock at no par
value.
On
October 5, 2009, the Board of Directors approved a capital increase of R$1,036
through issuance of 169,500 new common shares, with no par value, in connection
with the “Company’s Stock Option Plan” and with the exercise of such options by
the eligible executives, at the issuance price of R$6.11 per share, set on the
terms of the stock option plan. After the issuance of the shares, the Company’s
capital amounts to R$4,156,352 and is comprised of 372,979,642 registered common
shares with no par value.
53
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
16.
|
Shareholders’
equity
|
|
a)
|
Capital
(Continued)
|
On
October 29, 2009, the Board of Directors approved a capital increase of
R$380,063 through issuance of 23,753,953 new common shares, with no par value,
at issue price of R$16.00, due to exercise of 39,589,922 subscription warrants
by Cosan Limited, under the Board of Directors deliberation terms in the
September 19, 2008 meeting (note 16.g). After the issuance of the shares, the
Company’s capital amounts to R$4,536,415, below the limit of authorized capital,
as described on article 6 of the Company’s bylaws, represented by 396,733,595
common shares with no par value.
On
December 15, 2009, the Board of Directors approved a capital increase of R$4,834
upon issue of 655,194 new shares, due to: (i) exercise of 140,000 subscription
bonus, totaling 84,000 new shares; and (ii) 571,194 new shares, for purposes of
meeting the needs of the share-based plan, due to exercise of such options by
qualifying executives. With the issuance of new shares, the Company’s capital
corresponds to R$4,541,249 represented by 397,388,789 registered common shares,
nominated and with no par value.
The Board of
Directors’ Meeting held on December 22, 2009 approved the capital increase in
the amount of R$129,168, upon issue of 8,072,976 new Company shares, at the
issue price of R$16.00, in view of the exercise of 13,454,960 subscription
bonus. Of this total, the parent company Cosan Limited exercised the right to
5,403,560 subscription bonus, the equivalent to 3,242,136 new shares. In view of
the capital increase approved at the meeting, the Company’s capital stock
increased to R$4,670,417, divided into 405,461,765 book-entry, registered common
shares with no par value.
In
addition, the Board of Directors’ Meeting held on December 31, 2009 approved a
new capital increase of R$17,305, upon issue of 1,081,552 new shares, in view of
the exercise of 1,802,588 subscription bonus, thus increasing the Company’s
capital to R$3,687,722, within the limit of authorized capital, divided into
406,543,317 book-entry, registered common shares with no par value.
54
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
16.
|
Shareholders’
equity
|
|
|
a)
|
Capital
(Continued)
|
On
March 29, 2009, the directors convened at a meeting of the Board resolved to
increase the capital stock in the amount of R$104 through issue of 17,000 new
book-entry, registered shares of common stock without par value under the
Company's Stock Option Plan. This new issue reflected the exercise of options by
eligible officers at the strike price of R$6.11 per share as established in the
stock plan. In view of the issue of new shares, the capital stock of the Company
increased to R$4,687,826, duly within the authorized capital limit and divided
into 406,560,317 registered, book-entry shares of common stock at no par
value.
As
of March 31, 2010, the stock capital was divided into 406,560,317 (328.284.884
shares in 2009) registered, book-entry shares of common stock at no par value.
The authorized capital stock can be increased up to the limit of R$5,000,000
without any amendment to the by-laws upon resolution of the Board of
Directors.
|
|
b)
|
Dividends
|
Pursuant to the
Company's by-laws, the shareholders are entitled to a minimum statutory dividend
of 25% on the net income reported at year end, as adjusted pursuant to article
202 of the Brazilian Corporate Law. The amounts of the statutory reserve and of
dividends were determined as follows:
|
2010
|
||||
|
Net income
for the year
|
986,495 | |||
|
Accumulated
loss carryforward
|
(495,678 | ) | ||
|
Statutory
reserve calculation basis
|
490,817 | |||
|
Statutory
reserve established at 5%
|
(24,541 | ) | ||
|
Calculation
basis for dividend distribution
|
466,276 | |||
|
Proposed
dividends – 25%
|
(116,569 | ) | ||
On
June 7, 2010, the Board of Directors’ Meeting was approved the additional
distribution of dividends in the amount of R$83,431, to be ratified at a Special
Shareholders’ Meeting, which will total R$200,000 of dividends to be
distributed.
55
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
16.
|
Shareholders’
equity
|
|
|
c)
|
Legal
reserve
|
On
March 31, 2010, the Company allocated 5% of the net income reported for the
period to establish the statutory reserve, pursuant to its by-laws and in
compliance with the Brazilian Corporate Law.
|
|
d)
|
New investment and
improvement reserve
|
The management of
the Company will present a capital budget at the next general meeting and
propose that a portion of the income is retained for the purpose of continued
investments and improvements.
|
|
e)
|
Treasury
shares
|
On
March 31, 2010 the Company held in treasury 343,139 book entry common registered
shares with no par value, whose market value per share, as of that date,
amounted to R$21.68.
|
|
f)
|
Recorded granted
options
|
These consist of
the accounting record of the share-based plan (Note 23), in compliance with
Brazilian FASB (CPC) Technical Pronouncement Nº 10 – Share-based payment,
approved by Brazilian SEC (CVM) Resolution Nº 562/08.
|
|
g)
|
Stock purchase
warrants
|
According to the
meeting of the Board of Directors held on September 19, 2008, 1 (one) stock
purchase warrant issued by the Company was assigned as an additional advantage
to the subscribers for a new share, which entitled the holder to subscribe for
Cosan’s shares through certain conditions. A total of 55,000,000 stock purchase
single series warrants without part value were issued. The holder was entitled
to subscribe for 0.6 (zero point six) of a common share, the delivery of
fractional shares being voided. The stock purchase warrant was valid from its
issuance until December 31, 2009, and could be exercised at the holder’s
discretion, except for the days a Company’s General Meeting is held. The price
of exercise of each quantity of stock purchase warrants totaling 1 (one) share
was R$16.00.
As
of December 31, 2009, 49,987,552 subscription bonuses had been exercised. Other
12,488 remaining bonuses expired on December 31, 2009.
56
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
17.
|
Management
compensation
|
Expenses incurred
with compensation paid to senior management (executive officers and members of
the board of directors) recorded in the income for the year under General and
Administrative Expenses on March 31, 2010 and 2009 are listed
below:
|
Parent
and Consolidated
|
||||||||
|
2010
|
2009
|
|||||||
|
Management
fees
|
6,589 | 6,461 | ||||||
|
Recognized
granted stock options
|
7,576 | 9,095 | ||||||
|
Bonuses and
other variable compensation
|
6,325 | 1,235 | ||||||
|
Amounts
recorded in the income for the year
|
20,490 | 16,791 | ||||||
|
18.
|
Financial,
net
|
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Financial
expenses
|
||||||||||||||||
|
Interest
|
(326,042 | ) | (262,305 | ) | (567,408 | ) | (354,371 | ) | ||||||||
|
Inflation
adjustment expense
|
(30,436 | ) | (5,117 | ) | (64,395 | ) | (41,607 | ) | ||||||||
|
Bank
expenses
|
(312 | ) | (652 | ) | (1,527 | ) | (1,947 | ) | ||||||||
| (356,790 | ) | (268,074 | ) | (633,330 | ) | (397,925 | ) | |||||||||
|
Financial
revenues
|
||||||||||||||||
|
Interest
|
36,207 | 50,243 | 96,521 | 32,960 | ||||||||||||
|
Inflation
adjustment income
|
246 | 1,300 | 13,374 | 8,568 | ||||||||||||
|
Income from
money market investments
|
17,443 | 46,992 | 52,530 | 64,591 | ||||||||||||
|
Discounts
earned
|
411 | 212 | 1,333 | 357 | ||||||||||||
| 54,307 | 98,747 | 163,758 | 106,476 | |||||||||||||
|
Exchange
variation
|
||||||||||||||||
|
Exchange
losses (1)
|
534,484 | (609,136 | ) | 644,668 | (643,250 | ) | ||||||||||
|
Exchange
gains (1)
|
(42,139 | ) | 237,300 | (85,691 | ) | 69,562 | ||||||||||
| 492,345 | (371,836 | ) | 558,977 | (573,688 | ) | |||||||||||
|
Net impact of
derivatives (2)
|
||||||||||||||||
|
Commodity
derivatives
|
(113,686 | ) | 61,052 | (186,268 | ) | 63,998 | ||||||||||
|
Exchange and
interest derivatives
|
357,132 | 41,323 | 517,216 | (16,280 | ) | |||||||||||
| 243,446 | 102,375 | 330,948 | 47,718 | |||||||||||||
| 433,308 | (438,788 | ) | 420,353 | (817,419 | ) | |||||||||||
|
(1)
|
Includes
exchange gains (losses) on assets and liabilities denominated in foreign
currency; and,
|
|
(2)
|
Includes
realized and unrealized income from transactions in futures markets, and
with options,swaps and
NDFs.
|
57
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
19.
|
Other
operating revenues, net
|
|
Parent
Company
|
Consolidated
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Capital gains
from disposal of equity interests, net of losses (note 8)
|
- | - | 93,097 | 167,857 | ||||||||||||
|
Gains earned
with land sales
|
- | 18,399 | - | 18,399 | ||||||||||||
|
Capital gains
(losses) from business combinations (note 8.a and 8.b)
|
3,052 | - | (28,138 | ) | - | |||||||||||
|
Rent and
lease revenue
|
2,229 | 2,114 | 6,215 | 6,187 | ||||||||||||
|
Revenue from
sales of scrap and waste
|
1,554 | 1,780 | 6,417 | 5,925 | ||||||||||||
|
Constitution
of provision for judicial demands
|
(19,746 | ) | (27,307 | ) | (25,829 | ) | (25,908 | ) | ||||||||
|
Reversal of
provision for fixed asset losses
|
- | 3,342 | - | 3,342 | ||||||||||||
|
Gains earned
by joining the Refis IV tax repayment scheme
|
77,833 | - | 270,333 | - | ||||||||||||
|
Other income,
net
|
12,157 | 5,793 | 11,046 | 24,057 | ||||||||||||
| 77,079 | 4,121 | 333,141 | 199,859 | |||||||||||||
|
20.
|
Financial
instruments
|
|
|
a)
|
Risk
management
|
The Company and its
subsidiaries are exposed to market risks, especially: (i) volatility in the
price of sugar, and; (ii) volatility in foreign exchange rates. In order to
manage these risks, the Company adopts policies and procedures approved by
Management through its Risk Committee. These documents establish limits,
continuous monitoring of exposures, counterparties and financial instruments
approved for trading. Financial instruments and risks are managed through the
definition of strategies, establishment of control systems and determination of
foreign exchange, interest rate and price exposure limits.
As
of March 31, 2010 and March 31, 2009, the fair values of transactions involving
derivative financial instruments are as follows:
58
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
20.
|
Financial instruments
(Continued)
|
|
|
a)
|
Risk management
(Continued)
|
|
Parent Company
|
Consolidated
|
|||||||||||||||||||||||||||||||||||||||
|
Notional
|
Fair
Value
|
Notional
|
Fair
Value
|
|||||||||||||||||||||||||||||||||||||
|
Mar
31 2010
|
Mar
31 2009
|
Mar
31 2010
|
Mar
31 2009
|
Result
(*)
|
Mar
31 2010
|
Mar
31 2009
|
Mar
31 2010
|
Mar
31 2009
|
Result
(*)
|
|||||||||||||||||||||||||||||||
|
Price
risk
|
||||||||||||||||||||||||||||||||||||||||
|
Commodity
derivatives
|
||||||||||||||||||||||||||||||||||||||||
|
Future
contracts
|
||||||||||||||||||||||||||||||||||||||||
|
Sugar sales
contracts
|
994,483 | 423,550 | 146,449 | 9,638 | 146,449 | 994,483 | 423,550 | 146,449 | 9,638 | 146,449 | ||||||||||||||||||||||||||||||
|
(sugar
price hedge)
|
||||||||||||||||||||||||||||||||||||||||
|
Sugar
purchase contracts
|
182,954 | 141 | (34,067 | ) | (9 | ) | (34,067 | ) | 182,954 | 141 | (34,067 | ) | (9 | ) | (34,067 | ) | ||||||||||||||||||||||||
|
(average
price improvement)
|
||||||||||||||||||||||||||||||||||||||||
|
Options
contracts
|
||||||||||||||||||||||||||||||||||||||||
|
Call
sold
|
555,376 | 149,021 | (11,614 | ) | (6,728 | ) | 25,723 | 555,376 | 149,021 | (11,614 | ) | (6,728 | ) | 25,723 | ||||||||||||||||||||||||||
|
(average
price improvement)
|
||||||||||||||||||||||||||||||||||||||||
|
Purchased
put
|
259,165 | - | 22,756 | - | (14,117 | ) | 259,165 | - | 22,756 | - | (14,117 | ) | ||||||||||||||||||||||||||||
|
(sugar
price hedge)
|
||||||||||||||||||||||||||||||||||||||||
|
Sold
put
|
260,038 | - | (22,871 | ) | - | (17,735 | ) | 260,038 | - | (22,871 | ) | - | (17,735 | ) | ||||||||||||||||||||||||||
|
(average
price improvement)
|
||||||||||||||||||||||||||||||||||||||||
|
Swap
contracts
|
||||||||||||||||||||||||||||||||||||||||
|
Sugar
swap
|
100,794 | - | 1,081 | - | 1,081 | 100,794 | - | 1,081 | - | 1,081 | ||||||||||||||||||||||||||||||
|
(sugar
price hedge)
|
||||||||||||||||||||||||||||||||||||||||
| 101,733 | 2,901 | 107,333 | 101,733 | 2,901 | 107,333 | |||||||||||||||||||||||||||||||||||
59
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
20.
|
Financial instruments
(Continued)
|
|
|
a)
|
Risk management
(Continued)
|
|
Parent
Company
|
Consolidated
|
|||||||||||||||||||||||||||||||||||||||
|
Notional
|
Fair
Value
|
Notional
|
Fair
Value
|
|||||||||||||||||||||||||||||||||||||
|
Mar
31 2010
|
Mar
31 2009
|
Mar
31 2010
|
Mar
31 2009
|
Result
(*)
|
Mar
31 2010
|
Mar
31 2009
|
Mar
31 2010
|
Mar
31 2009
|
Result
(*)
|
|||||||||||||||||||||||||||||||
|
Exchange rate
risk
|
||||||||||||||||||||||||||||||||||||||||
|
Exchange rate
derivative
|
||||||||||||||||||||||||||||||||||||||||
|
Future
contracts
|
||||||||||||||||||||||||||||||||||||||||
|
Sold
|
1,060,945 | 861,787 | 7,997 | 7,384 | 7,997 | 1,060,945 | 861,787 | 7,997 | 7,384 | 7,997 | ||||||||||||||||||||||||||||||
|
(cash
flow hedge)
|
||||||||||||||||||||||||||||||||||||||||
|
Purchased
|
1,042,111 | - | (7,526 | ) | - | (7,526 | ) | 1,042,111 | - | (7,526 | ) | - | (7,526 | ) | ||||||||||||||||||||||||||
|
(cash
flow improvement)
|
||||||||||||||||||||||||||||||||||||||||
|
Forward
contracts
|
||||||||||||||||||||||||||||||||||||||||
|
Sold
|
957,149 | 427,510 | 36,559 | (53,330 | ) | 36,559 | 957,149 | 427,510 | 36,559 | (53,330 | ) | 36,559 | ||||||||||||||||||||||||||||
|
(cash
flow hedges)
|
||||||||||||||||||||||||||||||||||||||||
|
Options
contract
|
||||||||||||||||||||||||||||||||||||||||
|
Purchased
put
|
671,502 | - | 15,719 | - | (471 | ) | 671,502 | - | 15,719 | - | (471 | ) | ||||||||||||||||||||||||||||
|
(cash
flow hedges)
|
||||||||||||||||||||||||||||||||||||||||
|
Swap
contracts
|
||||||||||||||||||||||||||||||||||||||||
|
Exchange risk
transfer hedge
|
322,023 | - | 7,463 | - | 7,463 | - | - | - | - | - | ||||||||||||||||||||||||||||||
|
(cash
flow hedges)
|
||||||||||||||||||||||||||||||||||||||||
|
2009 senior
note hedge
|
- | 570,700 | - | (6,828 | ) | - | - | 570,700 | - | (6,828 | ) | - | ||||||||||||||||||||||||||||
|
(cash
flow hedge)
|
||||||||||||||||||||||||||||||||||||||||
| 60,213 | (52,774 | ) | 44,022 | 52,750 | (52,774 | ) | 36,559 | |||||||||||||||||||||||||||||||||
|
Interest rate
risk
|
||||||||||||||||||||||||||||||||||||||||
|
Interest
derivative
|
||||||||||||||||||||||||||||||||||||||||
|
Libor swap
contracts
|
||||||||||||||||||||||||||||||||||||||||
|
Interest hedge
(assets: variable / liabilities: fixed)
|
518,790 | - | (624 | ) | - | (624 | ) | 518,790 | - | (624 | ) | - | (624 | ) | ||||||||||||||||||||||||||
|
(cash
flow hedges)
|
||||||||||||||||||||||||||||||||||||||||
| (624 | ) | - | (624 | ) | (624 | ) | - | (624 | ) | |||||||||||||||||||||||||||||||
|
TOTAL
|
161,322 | (49,873 | ) | 150,731 | 153,859 | (49,873 | ) | 143,268 | ||||||||||||||||||||||||||||||||
|
Total
Assets
|
238,024 | 17,022 | 230,561 | 17,022 | ||||||||||||||||||||||||||||||||||||
|
Total
Liabilities
|
(76,703 | ) | (66,895 | ) | (76,703 | ) | (66,895 | ) | ||||||||||||||||||||||||||||||||
(*) Amounts
relative to income determined in the period of twelve months ended March 31,
2010, only for derivatives outstanding on such date.
60
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
20.
|
Financial instruments
(Continued)
|
|
|
a)
|
Risk management
(Continued)
|
Counterparties – The Company
operates commodity derivatives in futures and options markets on the New York
Board of Trade (NYBOT) and the London International Financial Futures and
Options Exchange (LIFFE), as well as over-the-counter market with selected
counterparties. The Company operates foreign exchange derivatives on
BM&FBovespa and OTC contracts registered with CETIP with banks Unibanco -
União de Bancos Brasileiros S.A, Banco Bradesco S.A., Banco Itaú BBA S.A., Banco
UBS Pactual S.A., Banco Barclays S.A. and Banco Morgan Stanley Witter
S.A.
Guarantee margins – The
Company’s derivative operations on commodity exchanges (NYBOT, LIFFE and
BM&FBovespa) require an initial guarantee margin. The brokers with which the
Company operates on these commodity exchanges offer credit limits for these
margins. As of March 31, 2010, the total credit limit used as initial margin is
R$68,646 (R$36,722 in 2009). As a requirement to trade in BM&FBovespa, the
Company posted on March 31, 2010, the amount of R$83,042 (R$111,026 in 2009) as
guarantee in the form of a settlement bond issued by a first-class banking
institution. Over-the-counter derivative transactions of the Company are exempt
from margin guarantees.
|
|
b)
|
Price
risk
|
The Company has
derivatives with the objective of mitigating its exposure to sugar price
oscillation in the international market. Derivative operations allow ensuring
minimum average profit for future production. The Company actively manages the
contracted positions, also the result of these activities is monitored daily.
through effective mark-to-market controls and price impact simulations in order
to allow adjusting targets and strategies due to changes in market
conditions.
The fair value of
these derivatives was measured through observable factors, such as market
quotation.
61
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
20.
|
Financial instruments
(Continued)
|
|
|
b)
|
Price risk
(Continued)
|
|
Price risk:
Commodity derivatives outstanding on March 31, 2010
|
|||||||||||||||||||||||||||||||||||
|
Derivatives
|
Purchased/sold
|
Market
|
Contract
|
Maturity
|
Number of
contracts
|
Strike
|
Average
price
|
Fair
price
|
Notional
|
Notional
|
Fair
value
|
||||||||||||||||||||||||
|
(units)
|
$ | (R ‘000 | ) | $ | (R ‘000 | ) | |||||||||||||||||||||||||||||
|
Future
|
Sold
|
LIFFE
|
White
Sugar
|
May/10
|
200 | - | ¢/T 597.25 | ¢/T 504.00 | 10,000 | T | 10,637 | 1,661 | |||||||||||||||||||||||
|
Future
|
Sold
|
LIFFE
|
White
Sugar
|
Aug/10
|
900 | - | ¢/T 608.37 | ¢/T 471.00 | 45,000 | T | 48,758 | 11,009 | |||||||||||||||||||||||
|
Future
|
Sold
|
LIFFE
|
White
Sugar
|
Oct/10
|
200 | - | ¢/T 537.63 | ¢/T 463.00 | 10,000 | T | 9,575 | 1,329 | |||||||||||||||||||||||
|
Future
|
Sold
|
NYBOT
|
#11 |
May/10
|
1,260 | - |
¢/lb
20.95
|
¢/lb
16.59
|
64,011 | T | 52,662 | 10,966 | |||||||||||||||||||||||
|
Future
|
Sold
|
NYBOT
|
#11 |
Jul/10
|
6,613 | - |
¢/lb
19.78
|
¢/lb
16.51
|
335,956 | T | 260,986 | 43,201 | |||||||||||||||||||||||
|
Future
|
Sold
|
NYBOT
|
#11 |
Oct/10
|
4,986 | - |
¢/lb
19.38
|
¢/lb
16.50
|
253,301 | T | 192,755 | 28,651 | |||||||||||||||||||||||
|
Future
|
Sold
|
NYBOT
|
#11 |
Mar/11
|
152 | - |
¢/lb
20.70
|
¢/lb
16.70
|
7,722 | T | 6,276 | 1,213 | |||||||||||||||||||||||
|
Future
|
Sold
|
NYBOT
|
#11 |
May/11
|
996 | - |
¢/lb
18.06
|
¢/lb
16.53
|
50,599 | T | 35,877 | 3,036 | |||||||||||||||||||||||
|
Future
|
Sold
|
NYBOT
|
#11 |
Jul/11
|
1,146 | - |
¢/lb
17.07
|
¢/lb
16.35
|
58,220 | T | 39,023 | 1,647 | |||||||||||||||||||||||
|
Future
|
Sold
|
NYBOT
|
#11 |
Oct/11
|
321 | - |
¢/lb
16.21
|
¢/lb
16.13
|
16,308 | T | 10,378 | 49 | |||||||||||||||||||||||
|
Swap
|
Sold
|
OTC
|
#11 |
Jul/10
|
4,500 | - |
¢/lb
18.49
|
¢/lb
16.51
|
228,611 | T | 165,971 | 17,760 | |||||||||||||||||||||||
|
Swap
|
Sold
|
OTC
|
#11 |
Oct/10
|
4,120 | - |
¢/lb
19.66
|
¢/lb
16.50
|
209,306 | T | 161,586 | 25,926 | |||||||||||||||||||||||
|
Sub-total
for sold sugar future contracts
|
1,289,033 | T | 994,483 | 146,449 | |||||||||||||||||||||||||||||||
|
Future
|
Purchased
|
NYBOT
|
#11 |
May/10
|
525 | - |
¢/lb
23.38
|
¢/lb
16.59
|
(26,671 T | ) | (24,485 | ) | (7,111 | ) | |||||||||||||||||||||
|
Future
|
Purchased
|
NYBOT
|
#11 |
Jul/10
|
310 | - |
¢/lb
24.43
|
¢/lb
16.51
|
(15,749 T | ) | (15,106 | ) | (4,896 | ) | |||||||||||||||||||||
|
Future
|
Purchased
|
NYBOT
|
#11 |
Mar/11
|
3,629 | - |
¢/lb
19.80
|
¢/lb
16.70
|
(184,362 T | ) | (143,364 | ) | (22,059 | ) | |||||||||||||||||||||
|
Sub-total
for purchased sugar future contracts
|
(226,782 T | ) | (182,954 | ) | (34,067 | ) | |||||||||||||||||||||||||||||
|
Futures
sub-total
|
1,062,251 | 811,529 | 112,382 | ||||||||||||||||||||||||||||||||
|
Call
|
Sold
|
NYBOT
|
#11 |
May/10
|
850 | 32.00 |
¢/lb
0.64
|
¢/lb
0.01
|
43,182 | T | 54,256 | (17 | ) | ||||||||||||||||||||||
|
Call
|
Sold
|
NYBOT/OTC
|
#11 |
Jul/10
|
5,987 | 20.00 |
¢/lb
1.30
|
¢/lb
0.38
|
304,154 | T | 238,848 | (4,538 | ) | ||||||||||||||||||||||
|
Call
|
Sold
|
NYBOT/OTC
|
#11 |
Oct/10
|
2,153 | 20.50 |
¢/lb
1.78
|
¢/lb
0.66
|
109,378 | T | 88,040 | (2,834 | ) | ||||||||||||||||||||||
|
Call
|
Sold
|
NYBOT/OTC
|
#11 |
Oct/10
|
1,784 | 21.00 |
¢/lb
1.87
|
¢/lb
0.60
|
90,631 | T | 74,730 | (2,135 | ) | ||||||||||||||||||||||
|
Call
|
Sold
|
NYBOT/OTC
|
#11 |
Mar/11
|
1,485 | 24.50 |
¢/lb
1.82
|
¢/lb
0.56
|
75,442 | T | 72,573 | (1,659 | ) | ||||||||||||||||||||||
|
Call
|
Sold
|
NYBOT
|
#11 |
Mar/11
|
300 | 25.00 |
¢/lb
1.34
|
¢/lb
0.52
|
15,241 | T | 14,960 | (311 | ) | ||||||||||||||||||||||
|
Call
|
Sold
|
NYBOT
|
#11 |
Mar/11
|
200 | 30.00 |
¢/lb
0.72
|
¢/lb
0.30
|
10,160 | T | 11,968 | (120 | ) | ||||||||||||||||||||||
|
Sub-total
for sold calls
|
648,188 | T | 555,376 | (11,614 | ) | ||||||||||||||||||||||||||||||
|
Put
|
Purchased
|
NYBOT/OTC
|
#11 |
Jul/10
|
5,987 | 16.50 |
¢/lb
2.33
|
¢/lb
1.28
|
304,154 | T | 197,049 | 15,286 | |||||||||||||||||||||||
|
Put
|
Purchased
|
NYBOT/OTC
|
#11 |
Oct/10
|
1,385 | 17.00 |
¢/lb
2.42
|
¢/lb
1.98
|
70,361 | T | 46,966 | 5,470 | |||||||||||||||||||||||
|
Put
|
Purchased
|
NYBOT/OTC
|
#11 |
Oct/10
|
434 | 17.50 |
¢/lb
2.70
|
¢/lb
2.31
|
22,048 | T | 15,150 | 2,000 | |||||||||||||||||||||||
|
Sub-total
for purchased puts
|
396,564 | T | 259,165 | 22,756 | |||||||||||||||||||||||||||||||
|
Put
|
Sold
|
NYBOT
|
#11 |
Jul/10
|
5,987 | 16.50 |
¢/lb
0.29
|
¢/lb
1.28
|
304,154 | T | 197,049 | (15,286 | ) | ||||||||||||||||||||||
|
Put
|
Sold
|
NYBOT
|
#11 |
Oct/10
|
1,385 | 17.00 |
¢/lb
0.53
|
¢/lb
1.98
|
70,361 | T | 46,966 | (5,470 | ) | ||||||||||||||||||||||
|
Put
|
Sold
|
NYBOT
|
#11 |
Oct/10
|
459 | 17.50 |
¢/lb
0.28
|
¢/lb
2.31
|
23,318 | T | 16,023 | (2,115 | ) | ||||||||||||||||||||||
|
Sub-total
for sold puts
|
397,834 | T | 260,038 | (22,871 | ) | ||||||||||||||||||||||||||||||
|
Swap
|
Purchased
|
OTC
|
#11 |
Oct/10
|
985 | - |
¢/lb
25.50
|
¢/lb
0.28
|
50,040 | T | 50,102 | 550 | |||||||||||||||||||||||
|
Swap
|
Purchased
|
OTC
|
#11 |
Oct/10
|
985 | - |
¢/lb
25.80
|
¢/lb
0.27
|
50,040 | T | 50,692 | 530 | |||||||||||||||||||||||
|
Swap
sub-total
|
100,081 | T | 100,794 | 1,081 | |||||||||||||||||||||||||||||||
|
Total for
commodities
|
1,986,902 | 101,733 | |||||||||||||||||||||||||||||||||
62
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
20.
|
Financial instruments
(Continued)
|
|
|
c)
|
Foreign exchange
risk
|
The Company has
derivatives in order to mitigate its exposure to the effect of foreign exchange
rate fluctuations on its revenue from exports. The exchange rate derivatives
together with the commodity price derivatives allow ensuring minimum average
profit from future production. The Company actively manages contracted
positions, and the result of such activities is monitored daily. through
effective mark-to-market controls and price impact simulations in order to allow
adjusting targets and strategies due to changes in market conditions. The fair
value of these derivatives was measured based on estimates that use discounted
cash flows based on market curves.
At
March 31, 2010, the Company had US$862,118 thousand (US$574,670 thousand in
2009) hedged by future, forward and option contracts traded in BM&FBovespa
and OTC, with a positive adjustment to market value estimated at R$52,750
(negative adjustment of R$45,945 in 2009).
63
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
20.
|
Financial instruments
(Continued)
|
|
|
c)
|
Foreign exchange
risk (Continued)
|
|
Price risk:
Exchange rate derivatives outstanding on March 31, 2010
|
||||||||||||||||||||||
|
Derivatives
|
Purchased/sold
|
Market
|
Contract
|
Screen
|
Number of
contracts
|
Strike
|
Average
price
|
Fair
price
|
Notional
|
Notional
|
Fair
value
|
|||||||||||
|
Future
|
Sold
|
BM&FBovespa
|
Commercial
U.S. dollar rate
|
Apr/10
|
6,220
|
-
|
$1.7943
|
$1.7810
|
$311,000
|
558,038
|
4,147
|
|||||||||||
|
Future
|
Sold
|
BM&FBovespa
|
Commercial
U.S. dollar rate
|
Jul/10
|
1,845
|
-
|
$1.8291
|
$1.8146
|
$92,250
|
168,738
|
1,342
|
|||||||||||
|
Future
|
Sold
|
BM&FBovespa
|
Commercial
U.S. dollar rate
|
Dec/10
|
1,400
|
-
|
$1.8959
|
$1.8812
|
$70,000
|
132,712
|
1,029
|
|||||||||||
|
Future
|
Sold
|
BM&FBovespa
|
Commercial
U.S. dollar rate
|
Jul/11
|
1,300
|
-
|
$1.9981
|
$1.9837
|
$65,000
|
129,873
|
934
|
|||||||||||
|
Future
|
Sold
|
BM&FBovespa
|
Commercial
U.S. dollar rate
|
Oct/11
|
700
|
-
|
$2.0452
|
$2.0297
|
$35,000
|
71,584
|
546
|
|||||||||||
|
Sub-total
for sold future contracts
|
$573,250
|
$1,060,945
|
$7,997
|
|||||||||||||||||||
|
Future
|
Purchased
|
BM&FBovespa
|
Commercial
U.S. dollar rate
|
Apr/10
|
(6,130)
|
-
|
$1.7943
|
$1.7810
|
$(306,500)
|
(549,963)
|
(4,087)
|
|||||||||||
|
Future
|
Purchased
|
BM&FBovespa
|
Commercial
U.S. dollar rate
|
May/10
|
(3,300)
|
-
|
$1.8049
|
$1.7907
|
$(165,000)
|
(297,803)
|
(2,339)
|
|||||||||||
|
Future
|
Purchased
|
BM&FBovespa
|
Commercial
U.S. dollar rate
|
Dec/10
|
(1,000)
|
-
|
$1.8959
|
$1.8812
|
$(50,000)
|
(94,794)
|
(735)
|
|||||||||||
|
Future
|
Purchased
|
BM&FBovespa
|
Commercial
U.S. dollar rate
|
Jul/11
|
(1,000)
|
-
|
$1.9910
|
$1.9837
|
$(50,000)
|
(99,550)
|
(366)
|
|||||||||||
|
Sub-total
for sold and purchased future contracts
|
$(571,500)
|
$(1,042,111)
|
$(7,526)
|
|||||||||||||||||||
|
Forward
|
Sold
|
OTC/Cetip
|
NDF
|
Jul/10
|
1
|
-
|
$1.8945
|
$1.8139
|
$46,000
|
87,147
|
3,628
|
|||||||||||
|
Forward
|
Sold
|
OTC/Cetip
|
NDF
|
Aug/10
|
1
|
-
|
$1.9360
|
$1.8255
|
$50,000
|
96,800
|
5,364
|
|||||||||||
|
Forward
|
Sold
|
OTC/Cetip
|
NDF
|
Sep/10
|
1
|
-
|
$1.9165
|
$1.8390
|
$75,000
|
143,738
|
5,593
|
|||||||||||
|
Forward
|
Sold
|
OTC/Cetip
|
NDF
|
Oct/10
|
1
|
-
|
$2.0320
|
$1.8534
|
$5,000
|
10,160
|
852
|
|||||||||||
|
Forward
|
Sold
|
OTC/Cetip
|
NDF
|
Oct/10
|
1
|
-
|
$2.0080
|
$1.8541
|
$23,000
|
46,184
|
3,376
|
|||||||||||
|
Forward
|
Sold
|
OTC/Cetip
|
NDF
|
Nov/10
|
1
|
-
|
$1.9980
|
$1.8665
|
$73,800
|
147,454
|
9,179
|
|||||||||||
|
Forward
|
Sold
|
OTC/Cetip
|
NDF
|
Jan/11
|
1
|
-
|
$1.9125
|
$1.8802
|
$50,000
|
95,625
|
1,512
|
|||||||||||
|
Forward
|
Sold
|
OTC/Cetip
|
NDF
|
Feb/11
|
1
|
-
|
$1.9880
|
$1.8965
|
$45,000
|
89,460
|
3,821
|
|||||||||||
|
Forward
|
Sold
|
OTC/Cetip
|
NDF
|
Jun/11
|
1
|
-
|
$2.0183
|
$1.9677
|
$70,000
|
141,281
|
3,134
|
|||||||||||
|
Forward
|
Sold
|
OTC/Cetip
|
NDF
|
Aug/11
|
1
|
-
|
$1.9860
|
$1.9837
|
$50,000
|
99,300
|
101
|
|||||||||||
|
Forward
sub-total
|
$487,800
|
957,149
|
36,559
|
|||||||||||||||||||
|
Onshore
Put
|
Purchased
|
BM&FBovespa
|
Commercial
U.S. dollar rate
|
Jul/10
|
6,800
|
1.80
|
$36.1590
|
$41.7130
|
$340,000
|
612,000
|
14,182
|
|||||||||||
|
Onshore
Put sub-total
|
$340,000
|
612,000
|
14,182
|
|||||||||||||||||||
|
Offshore
Put
|
Purchased
|
OTC
|
Commercial
U.S. dollar rate
|
Feb/11
|
475
|
1.80
|
$103.7832
|
$37.3177
|
$23,768
|
42,782
|
887
|
|||||||||||
|
Offshore
Put
|
Purchased
|
OTC
|
Commercial
U.S. dollar rate
|
Feb/11
|
176
|
1.90
|
$162.4785
|
$73.8414
|
$8,800
|
16,720
|
650
|
|||||||||||
|
Offshore
Put sub-total
|
$32,568
|
59,502
|
1,537
|
|||||||||||||||||||
|
Total
for export exchange rates
|
$862,118
|
$1,647,485
|
52,750
|
|||||||||||||||||||
|
Swap
|
Purchased
|
OTC/Cetip
|
U.S.
dollar/DI
|
1
|
1
|
-
|
US$ / 57.49%
CDI
|
$175,000
|
322,023
|
7,463
|
||||||||||||
|
Swap
|
Sold
|
OTC/Cetip
|
U.S.
dollar/DI
|
1
|
1
|
-
|
57.49% CDI /
US$
|
$(175,000)
|
(322,023)
|
(7,463)
|
||||||||||||
|
Total
for exchange rate
|
$862,118
|
$1,647,485
|
52,750
|
|||||||||||||||||||
64
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
20.
|
Financial instruments
(Continued)
|
|
|
c)
|
Foreign exchange
risk (Continued)
|
The Company does
not use derivative financial instruments to hedge foreign exchange exposure from
balance sheet. At March 31, 2010 and March 31, 2009, the Company and its
subsidiaries presented the following net balance sheet exposure to US
dollar:
|
Consolidated
|
||||||||||||||||
|
2010
|
2009
|
|||||||||||||||
| R$ |
US$
(thousand)
|
R$ |
US$
(thousand)
|
|||||||||||||
|
Amounts
pending foreign exchange closing
|
127,755 | 71,732 | 48,969 | 21,151 | ||||||||||||
|
Overnight
|
50,470 | 28,338 | 67,137 | 28,998 | ||||||||||||
|
Trade notes
receivable - foreign
|
148,655 | 83,467 | 162,822 | 70,327 | ||||||||||||
|
Related
parties
|
- | - | (405,871 | ) | (175,306 | ) | ||||||||||
|
Foreign
currency-denominated loans
|
(479,206 | ) | (269,066 | ) | (257,573 | ) | (111,253 | ) | ||||||||
|
Advances from
customers
|
(980,533 | ) | (550,552 | ) | - | - | ||||||||||
|
Senior Notes
due in 2009
|
- | - | (86,456 | ) | (37,343 | ) | ||||||||||
|
Senior Notes
due in 2014
|
(631,246 | ) | (354,433 | ) | - | - | ||||||||||
|
Senior Notes
due in 2017
|
(720,573 | ) | (404,589 | ) | (936,704 | ) | (404,589 | ) | ||||||||
|
Perpetual
bonds
|
(810,896 | ) | (455,304 | ) | (1,054,119 | ) | (455,304 | ) | ||||||||
|
Restricted
cash
|
44,972 | 25,251 | 11,757 | 5,078 | ||||||||||||
|
Foreign
exchange exposure, net
|
(3,250,602 | ) | (1,825,156 | ) | (2,450,038 | ) | (1,058,241 | ) | ||||||||
|
|
d)
|
Interest rate
risk
|
The Company
monitors fluctuations of the several interest rates to which its assets and
liabilities are pegged and, in the event of increased volatility of such rates,
it may engage in transactions with derivatives so as to minimize such risks. At
March 31, 2010, the Company had US$300,000 thousand hedged by swap contracts
traded in the over-the-counter market, whose market value is assessed negatively
at R$624.
|
Price risk:
outstanding commodities derivatives on March 31, 2010
|
||||||||||||||||||||||
|
Derivative
|
Purchased/
sold
|
Market
|
Contract
|
Table
|
Number of
contracts
|
Strike
|
Average
price
|
Fair
price
|
Notional
|
Notional
|
Fair
value
|
|||||||||||
|
(R$
‘000)
|
(R$
‘000)
|
(R$
‘000)
|
||||||||||||||||||||
|
Swap
|
Purchased
|
OCT/Cetip
|
Fix/Libor 3
month
|
1
|
-
|
1,199% / Libor
3 month
|
$300,000
|
518,790
|
(624)
|
|||||||||||||
|
Total
swap
|
$300,000
|
518,790
|
(624)
|
|||||||||||||||||||
65
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
20.
|
Financial instruments
(Continued)
|
|
e)
|
Credit
risk
|
A
significant portion of sales made by the Company and its subsidiaries is for a
selected group of best-in-class counterparts, i.e. trading companies, fuel
distribution companies and large supermarket chains. In the fuel distribution
activity, the diversity of the receivables, the selected clients and the follow
up of financing terms of sales by business segment and individual position
limits are procedures adopted to minimize eventual default in the accounts
receivable. The Company's sales policy is directly
related to the level of credit exposure experienced in the course of its
business.
Credit risk is
managed through specific rules of client acceptance, credit rating and setting
of limits for customer exposure, including the requirement of a letter of credit
from major banks and obtaining actual warranties on given credit, when
applicable. Management believes that the risk of credit is substantially covered
by the allowance for doubtful accounts.
The Company and its
subsidiaries historically have not recorded material losses on trade accounts
receivable.
|
|
f)
|
Debt acceleration
risk
|
As
of March 31, 2010, the Company was a party to loan and financing agreements with
covenants generally applicable to these operations, including requirements
related to cash generation, debt to equity ratio and others. These covenants are
being fully complied with by the Company and do not place any restrictions on
its operations.
|
g)
|
Market
values
|
As
of March 31, 2010 and 2009, the fair values of cash, marketable securities and
trade accounts receivable and payable approximate the respective amounts
recorded in the consolidated financial statements, due to their short-term
nature.
The fair value of
the Senior Notes maturing in 2014 and 2017, as described in Note 13, according
to their market value, were 114.85% and 103.5%, respectively, of their face
value at March 31, 2010.
The fair value of
Perpetual Notes as described in Note 13, according to its market value, was
99.80% of its face value at March 31, 2010.
66
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
20.
|
Financial instruments
(Continued)
|
|
g)
|
Market values
(Continued)
|
As
for the other loan and financing arrangements, their respective fair values
substantially approximate the amounts recorded in the financial statements
considering that such instruments are subject to variable interest
rates.
|
|
h)
|
Sensitivity
analysis
|
Pursuant to CVM
Rule Nº 475 issued on December 17, 2008, following is the sensitivity analysis
of the fair value of financial instruments, in accordance with the types of
risks deemed to be significant by the Company:
Assumptions
for the Sensitivity Analysis
For the analysis,
the Company adopted three scenarios, being one probable and two that may have
effects from impairment of the fair value of the Company’s derivative financial
instruments. The definition of the probable scenario included the market data at
March 31, 2010, the same one which determine the fair value of the derivatives
at that date and therefore there are no differences in relation to the fair
value of the derivative financial instruments. The possible adverse and remote
scenarios were established in view of adverse impacts of 25% and 50% on the
curves in the prices of the U.S. dollar and sugar:
|
Bourse:
Unit:
|
Sugar
#11 NYBOT US¢/lb
|
Sugar
Ref.
LIFFE
US$/ton
|
Dollar
BM&FBovespa
R$/US$
|
|||||||||
|
Apr-10
|
- | - | 1.781000 | |||||||||
|
May-10
|
16.59 | 504.00 | 1.790694 | |||||||||
|
Jun-10
|
- | - | 1.802495 | |||||||||
|
Jul-10
|
16.51 | - | 1.814598 | |||||||||
|
Aug-10
|
- | 471.00 | 1.828130 | |||||||||
|
Sep-10
|
- | - | 1.841761 | |||||||||
|
Oct-10
|
16.50 | 463.00 | 1.854871 | |||||||||
|
Nov-10
|
- | - | 1.867982 | |||||||||
|
Dec-10
|
- | 465.40 | 1.881189 | |||||||||
|
Jan-11
|
- | - | 1.896482 | |||||||||
|
Feb-11
|
- | - | 1.911138 | |||||||||
|
Mar-11
|
16.70 | 466.40 | 1.925085 | |||||||||
|
Apr-11
|
- | - | 1.940068 | |||||||||
|
May-11
|
16.53 | - | 1.952751 | |||||||||
|
Jun-11
|
- | - | 1.968527 | |||||||||
|
Jul-11
|
16.35 | - | 1.983682 | |||||||||
|
Aug-11
|
- | - | 1.998283 | |||||||||
|
Sept-11
|
- | - | 2.015064 | |||||||||
|
Oct-11
|
16.13 | - | 2.029650 | |||||||||
67
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
20.
|
Financial instruments
(Continued)
|
|
|
h)
|
Sensitivity
analysis (Continued)
|
Sensitivity
Exhibit
Following is the
sensitivity exhibit on the change in the fair value of the Company’s financial
derivatives:
|
Impacts
in P&L (*)
|
|||||||||||||
|
Risk
factor
|
Probable
Scenario
|
Possible
Scenario (25%)
|
Remote
Scenario (50%)
|
||||||||||
|
Price
risk
|
|||||||||||||
|
Goods
derivatives
|
|||||||||||||
|
Futures contracts:
|
|||||||||||||
|
Sale commitments
|
Sugar price
spike
|
146,449 | (215,057 | ) | (434,604 | ) | |||||||
|
Purchase commitments
|
Sugar price
decline
|
(34,843 | ) | (41,584 | ) | (81,219 | ) | ||||||
|
Options:
|
|||||||||||||
|
Put
|
Sugar price
spike
|
(11,614 | ) | 3,298 | (81,065 | ) | |||||||
|
Call
|
Sugar price
spike
|
22,756 | (22,756 | ) | (22,756 | ) | |||||||
|
Call - sold
|
Sugar price
decline
|
(22,871 | ) | (45,423 | ) | (111,448 | ) | ||||||
|
Swap
contracts
|
Sugar price
decline
|
1,081 | (55,410 | ) | (72,292 | ) | |||||||
|
Exchange rate
risk
|
|||||||||||||
|
Exchange
rate derivatives
|
|||||||||||||
|
Futures contracts:
|
|||||||||||||
|
Sale commitments
|
R$/US$
exchange rate appreciation
|
7,997 | (263,237 | ) | (526,474 | ) | |||||||
|
Purchase commitments
|
R$/US$
exchange rate depreciation
|
(7,526 | ) | (258,646 | ) | (517,292 | ) | ||||||
|
Forward contract:
|
|||||||||||||
|
Sale commitments
|
R$/US$
exchange rate appreciation
|
36,559 | (231,086 | ) | (461,421 | ) | |||||||
|
Option:
|
|||||||||||||
|
Call - purchased
|
R$/US$
exchange rate appreciation
|
15,719 | (15,719 | ) | (15,719 | ) | |||||||
|
Interest rate
risk
|
|||||||||||||
|
Interest
derivatives
|
|||||||||||||
|
Swap
contracts
|
Libor curve
decline
|
(624 | ) | (2,140 | ) | (4,280 | ) | ||||||
(*) Projected
results to occur up to 12 months from March 31, 2010.
68
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
21.
|
Sales
commitments
|
Sales
Considering that
the Company engages primarily with commodities, sales are essentially closed at
spot prices. However, the Company has entered into several sugar market
agreements whereby it undertakes to sell sugar quantities against future
crops.
Commitments with
sales of sugar, in tonnes, at March 31, 2010 and 2009, are as
follows:
|
Years
|
2010
|
2009
|
||||||
|
2010
|
- | 2,428,000 | ||||||
|
2011
|
2,005,434 | 1,828,000 | ||||||
|
2012
|
1,828,134 | 1,828,000 | ||||||
|
Total
|
3,833,568 | 6,084,000 | ||||||
Sugar
Purchases
Cosan has entered
several sugar cane purchase agreements with third parties for the purpose of
securing a portion of its production in subsequent crops/harvest seasons. The
quantity of sugar cane to be purchased was calculated against the estimated
quantity to be crushed per location. Amounts payable by the Company are
determine at the end of each crop/harvest, in accordance with prices published
by CONSECANA.
Crop purchase
commitments expressed in metric tonnes as of March 31, 2010 and 2009, are as
follows:
|
Years
|
2010
|
2009
|
||||||
|
2010
|
- | 18,294,022 | ||||||
|
2011
|
27,029,473 | 15,597,478 | ||||||
|
2012
|
23,600,912 | 13,667,154 | ||||||
|
2013
|
20,112,639 | 9,754,713 | ||||||
|
2014
|
16,345,120 | 5,701,801 | ||||||
|
2015
|
13,667,148 | 3,198,591 | ||||||
|
Beginning in
2015
|
120,129,217 | 5,030,758 | ||||||
|
Total
|
220,884,509 | 71,244,517 | ||||||
As
of March 31, 2010, the total sugarcane crushing capacity for the next crop,
considering all facilities of the Company, is of approximately 60,000 metric
tonnes.
The Company has
entered into several agreements for the purchase of plant equipment intended for
plant maintenance and expansion, as well as to support a CHP (combined heat and
power) project, in the total amount of R$330,801 as of March 31, 2010 (R$716,790
in 2009).
69
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
21.
|
Sales commitments
(Continued)
|
Sugar
Purchases (Continued)
Additionally, the
Company, through its subsidiary Rumo Logística S.A., has entered into a purchase
and sale commitment covering rail cars, train engines and other improvements for
the purpose of expanding its logistics business over the next years, as
follows:
|
Years
|
2010
|
|||
|
2011
|
652,678 | |||
|
2012
|
126,892 | |||
|
2013
|
94,682 | |||
|
Total
|
874,252 | |||
Lease
Agreements
The Company and its
subsidiaries have entered several operating lease agreements to secure crop
land, as well as a concession agreement covering operations of maritime terminal
facilities. These agreements will expire in 20 years.
Minimum payments
under each such covenants are calculated on a straight-line basis, pursuant to
each respective agreement. Expenses associated with the foregoing agreements
during the years ended on March 31, 2010 and 2009, are as follows:
|
2010
|
2009
|
|||||||
|
Minimum
installment
|
113,953 | 88,593 | ||||||
|
Variable
installment
|
112,990 | 85,267 | ||||||
|
Total
|
226,943 | 173,860 | ||||||
The schedule of
future payments under the foregoing agreements as of March 31, 2010 and 2009, is
as follows:
|
Years
|
2010
|
2009
|
||||||
|
2010
|
- | 93,662 | ||||||
|
2011
|
131,362 | 96,364 | ||||||
|
2012
|
117,937 | 93,008 | ||||||
|
2013
|
117,200 | 86,058 | ||||||
|
2014
|
117,655 | 82,667 | ||||||
|
2015
|
117,431 | 82,667 | ||||||
|
Beginning in
2015
|
1,354,501 | 992,287 | ||||||
|
Total
|
1,956,086 | 1,526,713 | ||||||
70
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
22.
|
Insurance
|
At
March 31, 2010, the Company and its subsidiaries maintain insurance coverage
against fire, thunderbolts and explosions of any nature for the whole sugar and
ethanol inventory and for specific buildings, equipment, facilities and
machinery.
The Company does
not foresee any difficulties to renew its insurance policies and believes that
the coverage established is reasonable in terms of amounts and consistent with
Brazilian industry standards.
The scope of our
independent auditors work did not include an opinion on the sufficiency of the
insurance coverage, which, as determined by the Company management, was
considered sufficient to cover any claims.
|
23.
|
Stock
option plan
|
At
the Annual and Extraordinary General Meeting held on August 30, 2005, the
Guidelines for the Outlining and Structuring of a Stock Option Plan for
Company’s officers and employees were approved, thus authorizing the issue of up
to 5% of the Company’s share capital. The stock option plan was designed to
obtain and retain the services rendered by senior officers and employees,
offering them the opportunity to become shareholders of the Company. On
September 22, 2005, the Board of Directors approved the distribution of stock
options corresponding to 4.302.780 common shares to be issued by the Company
related to 3.25% of the share capital at the time, authorized by the
Annual/Extraordinary General Meeting. On that same date, eligible officers were
informed of the material terms and conditions of the share-based compensation
agreement.
On
September 11, 2007, the Board of Directors approved the distribution of stock
options, corresponding to 450,000 common shares to be issued or purchased by the
Company related to 0.24% of the share capital at the time, authorized by the
Annual/Extraordinary General Meeting. On that same date, the eligible officer
was informed of the material terms and conditions of the share-based
compensation agreement. The remaining 1.51% may still be
distributed.
On
August 7, 2009, the Board of Directors approved an additional distribution of
stock options, with no vesting period, corresponding to 165,657 common shares to
be issued or purchased by the Company, following a change in the management
members.
71
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
23.
|
Stock option plan
(Continued)
|
Based on the fair
value at the issue date, exercise price is R$6.11 (six reais and eleven cents)
per share, without discount. The exercise price was calculated before the above
evaluation based on an expected private equity agreement based on that
eventually was not made. The options are exercisable over a 3-year period,
considering a maximum percentage of 25% p.a. of total stock options offered by
the Company, within a period of 5 years.
The options
exercised shall be settled only upon issue of new common or treasury shares that
the Company may have at each relevant date.
Should any holder
of stock options cease to be an employee or manager of the Company, by death,
retirement or permanent disability of the beneficiary, any options not
previously vesting shall become extinct on the date that employee or officer
separates from the Company. However, in the case of termination without good
cause, the terminated employees shall be entitled to exercise 100% of their
options referring to that particular year, on top of exercising 50% of their
options in the coming year.
At
March 31, 2010 options equivalent to 653,976 common shares were not
exercised.
|
Shares
|
Weighted
average strike price
|
|||||||
|
Outstanding
as of April 30, 2005
|
- | - | ||||||
|
Option awards
(SRA dated 9/22/2005)
|
4,302,780 | 6.11 | ||||||
|
Outstanding
as of April 30, 2006
|
4,302,780 | 6.11 | ||||||
|
Exercised
(SRA dated 11/20/2006)
|
(1,132,707 | ) | 6.11 | |||||
|
Forfeitures
(SRA dated 20/11/2006)
|
(285,060 | ) | - | |||||
|
Outstanding
as of April 30, 2007
|
2,885,013 | 6.11 | ||||||
|
Option awards
(SRA dated 9/11/2007)
|
450,000 | 6.11 | ||||||
|
Exercised
(SRA dated 11/19/2007)
|
(922,947 | ) | 6.11 | |||||
|
Exercised
(SRA dated 12/11/2007)
|
(38,725 | ) | 6.11 | |||||
|
Outstanding
as of April 30, 2008
|
2,373,341 | 6.11 | ||||||
|
Forfeitures
(SRA dated 3/23/2009)
|
(165,657 | ) | - | |||||
|
Exercised
(SRA dated 3/6/2009)
|
(736,852 | ) | 6.11 | |||||
|
Outstanding
as of March 31, 2009
|
1,470,832 | 6.11 | ||||||
|
Exercised
(SRA dated 7/15/2009)
|
(224,819 | ) | 6.11 | |||||
|
Option awards
(SRA dated 8/7/2009)
|
165,657 | 6.11 | ||||||
|
Exercised
(SRA dated 10/5/2009)
|
(169,500 | ) | 6.11 | |||||
|
Exercised
(SRA dated 12/15/2009)
|
(571,194 | ) | 6.11 | |||||
|
Exercised
(SRA dated 3/29/2010)
|
(17,000 | ) | 6.11 | |||||
|
Outstanding
as of March 31, 2010
|
653,976 | 6.11 | ||||||
Until March 31,
2010, all stock option exercises were settled through the issuance of new common
shares. Should the remaining options also be exercised through the issuance of
new common shares, the current shareholders’ interest would be reduced by 0.16%
(0.45% in 2009) after exercising all remaining options.
72
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
23.
|
Stock option plan
(Continued)
|
At March 31, 2010,
R$2,960 regarding the unrecognized remuneration cost of stock options will be
recognized within nearly six months (R$9,978 in 2009, with a deadline of nearly
18 months).
The fair value of
the stock-based compensation plan was estimated using the binomial pricing
method against the following assumptions:
|
Options
awarded on September 22, 2005
|
Options
awarded on September 22, 2007
|
Options
awarded on August 7, 2009
|
|||
|
Award price –
R$
|
6.11
|
6.11
|
6.11
|
||
|
Estimated
time to exercise (in years)
|
7.5
|
7.5
|
Immediate
|
||
|
Interest
rate
|
14.52%
|
9.34%
|
(1)
|
||
|
Volatility
|
34.00%
|
46.45%
|
(1)
|
||
|
Dividend
income
|
1.25%
|
1.47%
|
(1)
|
||
|
Weighted
average fair value at award date – R$
|
12.35
|
18.19
|
(1)
|
|
|
(1)
|
The fair
value used was the market value at assignment date (R$17.90) since
exercise of these options was not subject to a vesting
period.
|
Estimated Time to Exercise –
The term estimated by the Company represents such period during which the
compensation under the stock option plan must remain outstanding, and was
determined based on the assumption that executive officers will effectively
exercise their options at the end of the period. Thus, the term was determined
based on 5 and 10 years, on average. The Company does not anticipate any
variance from this estimate, considering that options are primarily awarded to
its own executive officers who are not subject to high turnover or
attrition.
Expected Volatility – The
Company has elected to replace historical volatility of its stock for an
appropriate comprehensive industry index, which is based on stock price
volatility, and to factor this index into its pricing model. The Company
identified and compared similar publicly-held corporations that operate on a
global scale and publish information regarding prices of stock or available
options, taking into account the expected or implicit historical volatility of
stock prices of such corporations. The Company then estimated the expected
volatility of its own stock in this global scenario.
Expected Dividends – Since the
Company went public just recently, expected dividends were calculated based on
the current price of outstanding stock at award date, adjusted by the average
ROI rate during the expected period relative to the book value of
stock.
Risk-Free Interest Rate – The
Company adopts the SELIC rate.
73
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
24.
|
Pension
plan
|
a) Pension
Plan
Previd Exxon -
Sociedade de Previdência Privada, a closed-ended supplementary pension entity
sponsored by Cosan CL (previously denominated Essobrás), set up on December 23,
1980, engaged mainly in the supplementation of benefits within certain limits
set in its formation deed, to which all employees of the sponsor and their
beneficiaries are entitled as social security insured workers. Cosan CL
determined the implications of implementing the procedures set forth in NPC 26
of IBRACON.
b) Actuarial
Liabilities
This refers to the
responsibility assumed by Cosan CL to complement retirement and pension benefits
under an employment severance pa, as well as to accounting for the pension pa.
These liabilities were determined by an independent actuary professional and
represent the present value of benefits and pensions. As of March 31, 2010, the
relevant balances were reported in non-current liabilities as actuarial
liabilities in the amount of R$61,788 (R$60,378 in 2009).
The consolidated
balance of the provision for pension pa expenditures, and the corresponding
transaction during the year, are described as follows:
|
2010
|
2009 | (*) | ||||||
|
Present
value of actuarial liabilities at the beginning of the
year
|
(362,339 | ) | (356,632 | ) | ||||
|
Cost of
interest
|
(32,584 | ) | (10,466 | ) | ||||
|
Cost of
current service
|
(5,478 | ) | (1,790 | ) | ||||
|
Paid
benefits
|
18,985 | 6,901 | ||||||
|
Actuarial
gain (loss) on the liability at beginning of year
|
55,882 | (352 | ) | |||||
|
Present
value of actuarial liability at year end
|
(325,534 | ) | (362,339 | ) | ||||
|
Fair
value of plan assets at the beginning of the year
|
297,231 | 291,707 | ||||||
|
Expected
income from pa assets
|
31,046 | 9,227 | ||||||
|
Contributions
made to the pa
|
8,403 | 3,198 | ||||||
|
Paid
benefits
|
(18,985 | ) | (6,901 | ) | ||||
|
Gain from
asset fair value
|
30,008 | - | ||||||
|
Fair
value of pa assets at year end
|
347,703 | 297,231 | ||||||
|
Present
value of assets (liabilities), net
|
22,169 | (65,108 | ) | |||||
|
Non-recognized
actuarial losses (gains)
|
(83,957 | ) | 4,730 | |||||
|
Actuarial
liabilities
|
(61,788 | ) | (60,378 | ) | ||||
(*) Four-month
period ended on March 31, 2019.
74
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
24.
|
Pension plan
(Continued)
|
For actuarial
calculation purposes, which calculations were done by professional actuaries
pursuant to NPC 26, the following assumptions were taken into account relative
to the year ended on March 31, 2010:
|
Benefit
pa
|
Defined
benefit
|
||
|
Actuarial
evaluation method
|
Projected
credit unit
|
||
|
Life
table
|
AT 83
segregated by gender, corrected by 10%
|
||
|
Actuarial
liability discount rate
|
Interest:
6.58% pa + inflation: 4.50% pa
|
||
|
Expected
yield for plant asset
|
Interest:
5.98% pa + inflation: 4.50% pa
|
||
|
Wage increase
rate
|
1.57% +
inflation: 4.50% pa
|
||
|
Estimated
benefit increase rate
|
0.00% pa +
inflation: 4.50% pa
|
The amount of the
contributions made by Cosan CL to Previd Exxon – Sociedade de Previdência
Privada in the year ended on March 31, 2010, was R$8,403.
|
25.
|
Segment
Reporting (consolidated)
|
|
|
a)
|
Segment
Reporting
|
Segment information
is based on information used by the management of Cosan to assess the
performance of operating segments and make investment decisions. In view of the
changes occurred in the course of the current year as well as of the growth and
importance of other business ventures, the Company has modified its current
segment structure, which comprises three segments: (i) sugar and ethanol
(“CAA”), (ii) fuel and lubricant distribution (“CCL”) and (iii) logistics
(“RUMO”). Operating assets associated with these segments are located solely in
Brazil.
The primary
activity of the CAA segment is the production and marketing of an array of
sugarcane by-products, including raw sugar (referred to as VHP), and fuel
ethanol, both anhydrous and hydrous. This segment also engages in power
cogeneration from sugar cane bagasse.
The CCL segment
engages in distribution and marketing of fuels and lubricants, especially
through the franchised gas station network of the “Esso” brand in the whole
national territory.
The RUMO segment
operates logistic services comprising transportation, warehousing and cargo
rigging for both the CAA segment (sugar) and third parties.
75
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
25.
|
Segment Reporting
(consolidated) (Continued)
|
|
|
a)
|
Segment
Reporting (Continued)
|
Below are some
segment-level income and asset selected information. Amounts were stated in
accordance with the same accounting policies used in preparing the consolidated
statements:
|
2010
|
||||||||||||||||||||
|
CAA
|
CCL
|
RUMO
|
Adjustments
and exclusions
|
Consolidated
|
||||||||||||||||
|
Balance
Sheet:
|
||||||||||||||||||||
|
Property,
plant and equipment
|
4,943,614 | 356,170 | 294,033 | (32,752 | ) | 5,561,065 | ||||||||||||||
|
Intangibles
|
1,309,387 | 1,379,769 | 69,146 | 143,006 | 2,901,308 | |||||||||||||||
|
Loans and
financing, net of cash and cash equivalents
|
(4,351,613 | ) | (444,964 | ) | (106,502 | ) | 44,014 | (4,859,065 | ) | |||||||||||
|
Other assets
and liabilities, net
|
3,763,800 | 610,384 | 13,706 | (2,833,617 | ) | 1,554,273 | ||||||||||||||
|
Total assets
(net of liabilities) per segment
|
5,665,188 | 1,901,359 | 270,383 | (2,679,349 | ) | 5,157,581 | ||||||||||||||
|
Result
for the period (12 months):
|
||||||||||||||||||||
|
Net operating
revenue
|
5,380,134 | 10,145,054 | 158,249 | (347,382 | ) | 15,336,055 | ||||||||||||||
|
Gross
profit
|
1,312,143 | 770,492 | 42,728 | - | 2,125,363 | |||||||||||||||
|
SG&A
expenses
|
(850,814 | ) | (492,828 | ) | (18,111 | ) | - | (1,361,753 | ) | |||||||||||
|
Other
operating revenues, net
|
312,202 | 16,928 | 4,011 | - | 333,141 | |||||||||||||||
|
Other
selected information:
|
||||||||||||||||||||
|
Additions to
PP&E and intangible assets
|
1,689,880 | 88,300 | 147,943 | - | 1,926,123 | |||||||||||||||
|
Depreciation
and amortization
|
584,727 | 37,450 | 14,167 | - | 636,344 | |||||||||||||||
|
2009
|
||||||||||||||||||||
|
CAA
|
CCL
|
RUMO
|
Adjustments
and exclusions
|
Consolidated
|
||||||||||||||||
|
Balance
Sheet:
|
||||||||||||||||||||
|
Property,
plant and equipment
|
3,079,833 | 297,993 | 68,100 | 19,310 | 3,465,236 | |||||||||||||||
|
Intangibles
|
980,651 | 2,236 | - | 1,464,577 | 2,447,464 | |||||||||||||||
|
Loans and
financing, net of cash and cash equivalents
|
(2,598,952 | ) | 91,828 | 11,139 | (1,119,619 | ) | (3,615,604 | ) | ||||||||||||
|
Other assets
and liabilities, net
|
6,815,120 | (181,101 | ) | (3,401 | ) | (5,531,087 | ) | 1,099,531 | ||||||||||||
|
Total assets
(net of liabilities) per segment
|
8,276,652 | 210,956 | 75,838 | (5,166,819 | ) | 3,396,627 | ||||||||||||||
|
Result
for the period (11 months):
|
||||||||||||||||||||
|
Net operating
revenue
|
3,129,574 | 3,106,000 | 53,850 | (19,335 | ) | 6,270,089 | ||||||||||||||
|
Gross
profit
|
595,763 | 189,883 | 13,786 | - | 799,432 | |||||||||||||||
|
SG&A
expenses
|
(531,140 | ) | (171,557 | ) | (5,745 | ) | - | (708,442 | ) | |||||||||||
|
Other
operating revenues, net
|
187,499 | 1,561 | 10,799 | - | 199,859 | |||||||||||||||
|
Other
selected information:
|
||||||||||||||||||||
|
Additions to
PP&E and intangible assets
|
1,329,185 | 11,300 | 5,633 | - | 1,346,118 | |||||||||||||||
|
Depreciation
and amortization
|
408,623 | 12,628 | 5,906 | - | 427,157 | |||||||||||||||
76
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
25.
|
Segment Reporting
(consolidated) (Continued)
|
|
|
b)
|
Opening of sales net
revenues per segment:
|
|
2010
|
2009
|
|||||||
|
CAA
|
||||||||
|
Sugar
|
3,377,832 | 1,805,081 | ||||||
|
Ethanol
|
1,747,646 | 1,176,024 | ||||||
|
Cogeneration
|
93,583 | 15,100 | ||||||
|
Other
|
161,073 | 133,369 | ||||||
| 5,380,134 | 3,129,574 | |||||||
|
CCL
|
||||||||
|
Fuel
|
9,437,316 | 2,893,859 | ||||||
|
Lubes
|
634,045 | 186,375 | ||||||
|
Other
|
73,693 | 25,766 | ||||||
| 10,145,054 | 3,106,000 | |||||||
|
Rumo
|
||||||||
|
Raise
|
142,120 | 53,850 | ||||||
|
Transportations
|
16,129 | - | ||||||
| 158,249 | 53,850 | |||||||
|
Adjustments/eliminations
|
(347,382 | ) | (19,335 | ) | ||||
|
Total
|
15,336,055 | 6,270,089 | ||||||
|
|
c)
|
Sales revenues per
region
|
The net operating
revenue share per geographic area, expressed as a percentage, is as
follows:
|
2010
|
2009
|
|||||||
|
Brazil
|
86.4 | % | 73.6 | % | ||||
|
Europe
|
9.2 | % | 18.5 | % | ||||
|
Latin America
(other than Brazil)
|
2.8 | % | 5.0 | % | ||||
|
Middle East
and Asia
|
1.2 | % | 1.9 | % | ||||
|
North
America
|
0.3 | % | 0.9 | % | ||||
|
Africa
|
0.1 | % | 0.1 | % | ||||
|
Total
|
100.0 | % | 100.0 | % | ||||
77
COSAN
S.A. INDÚSTRIA E COMÉRCIO
Notes to the
Financial Statements (Continued)
March 31, 2010 and
2009
(In thousands of
reais)
|
25.
|
Segment Reporting
(consolidated) (Continued)
|
|
|
d)
|
Significant
customers
|
CAA
|
|
Sales in this
segment are relatively dispersed, with one single customer representing
more than 10% of total sales of this segment in 2010 and 2009 (Grupo
SUCDEN with 17% and 14% of sales,
respectively).
|
|
|
CCL
|
|
|
Sales in this
segment are highly dispersed and there is no single customer or economic
group representing sales of 10% or more in the
segment.
|
|
|
RUMO
|
In
2010 33% of the sales in this segment were for the CAA segment (52% in 2009),
with two other customers generating revenues of more than 10% of the total
revenues in this segment, these being Grupo SUCDEN with 16% (14% in 2009) and
Grupo ED & F MAN with 14% in 2010 (no sales in 2009).
78
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
COSAN
LIMITED
|
||||||
|
Date:
|
June
14, 2010
|
By:
|
/s/
Marcelo Eduardo Martins
|
|||
|
Name:
|
Marcelo
Eduardo Martins
|
|||||
|
Title:
|
Chief
Financial Officer and Investor Relations Officer
|
|||||