EM LATAM CREDIT: Brazil's Cosan 1Q 2025 Earnings Disappointing – Negative take
Cosan (CSANBZ; Ba2 neg /BB /BB)
• Brazil holding company Cosan announced lackluster results dragged down by its ethanol processing and sugar crushing subsidiary Raizen.
• Cosan EBITDA dropped 31% to BRL5bn of which almost all was due to Raizen. Please see our 1Q 2025 earnings post for more information:
https://mni.marketnews.com/3H92fiE
• Natural gas distribution subsidiary Compass generated a 45% increase in EBITDA but that was offset by weakness in Rumo, the railroad segment, that was down 20%.
• Debt reduction was an important theme for the first quarter and the company was able to lower net debt BRL6bn leaving a Debt Service Coverage Ratio (DSCR) of 1.2x, about the same QoQ and YoY.
• The company divested its stake in Brazil iron ore mining company Vale January 2025 for BRL9.1bn (USD1.54bn) and used about USD900mn of those proceeds to tender for outstanding debt and redeem their 2027 notes.
• The company acknowledged on the conference call today that they needed more divestments to reduce debt and also mentioned a possible balance sheet restructuring for Raizen. Raizen announced a few days ago the sale of a sugarcane processing plant:
https://mni.marketnews.com/45di2XK
• These past few months there has been mention of a possible capital raise as well as the potential for global super major oil company Royal Dutch Shell to add to its contribution to the Raizen joint venture as the company is currently structured 50/50 between Cosan and Shell.
• Cosan 2031s were last quoted T+241bps, 32bps wider QTD and 64bps tighter YTD.
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EURJPY TECHS: Bullish Outlook
- RES 4: 165.43 High Nov 8
- RES 3: 164.90 High Dec 30 ‘24 and a key medium-term resistance
- RES 2: 164.55 High Jan 7
- RES 1: 163.55/164.19 High Apr 14 / High Mar 18 and the bull trigger
- PRICE: 162.19 @ 16:06 GMT Apr 16
- SUP 1: 161.05/158.30 50-day EMA / Low Apr 7 and key support
- SUP 2: 157.02 76.4% retracement of the Feb 28 - Mar 18 bull cycle
- SUP 3: 155.60 Low Low Mar 4
- SUP 4: 154.80 Low Low Feb 28
Short-term weakness in EURJPY appears corrective and trend conditions remain bullish. Key short-term support has been defined at 158.30, the low on Apr 7. A break of this level is required to signal scope for a deeper retracement. This would open 157.02, a Fibonacci retracement. For bulls, a resumption of gains would expose 164.19, the Mar 18 high and the bull trigger. Clearance of this hurdle would resume the uptrend.
LOOK AHEAD: CORRECTION: Thursday Data Calendar 5Y TIPS Time
Tsy 5Y TIPS auction moved to 1130ET as Thursday sees an early pit close (1300ET) - Globex closes normal time while markets closed Friday for Easter Holiday
- US Data/Speaker Calendar (prior, estimate)
- 17-Apr 0830 Initial Jobless Claims (223k, 225k)
- 17-Apr 0830 Continuing Claims (1.850M, 1.870M)
- 17-Apr 0830 Housing Starts (1.501M, 1.420M), MoM (11.2%, -5.4%)
- 17-Apr 0830 Building Permits (1.459M, 1.450M), MoM (-1.0%, -0.6%)
- 17-Apr 0830 Philadelphia Fed Business Outlook (12.5, 2.0)
- 17-Apr 1130 US Tsy $85B 4W, $75B 8W bill auctions
- 17-Apr 1130 US Tsy $25B 5Y TIPS (91282CNB3)
- 17-Apr 1145 Feb Gov Barr fireside chat on cyber risks (text, Q&A)
BONDS: EGBs-GILTS CASH CLOSE: Bund Yields Pull Back Ahead Of ECB
German instruments outperformed UK counterparts at the short end, but vice versa at the long end Wednesday.
- European core instruments gained in initial morning trade, due in part fo softer-than-expected UK CPI data and some concerns over China-US trade tensions.
- However, risk assets recovered following the publication of a Bloomberg sources piece casting more soothing tones ("China Open to Talks If US Shows Respect"), pushing Bunds and Gilts to the weakest levels of the day.
- Bunds and Gilts would retrace higher, and close near the middle of the session's ranges. On the day, the German curve bull flattened to through the 10Y tenor (a poor auction weighed on the 30Y segment), with the UK's twist flattening.
- Periphery / semi-core EGB spreads were mixed.
- Thursday's highlight is the ECB decision - MNI's preview is here. The ECB is widely expected to cut its three key rates by 25bp this week, taking its deposit rate to 2.25%. As MNI reported in a sources piece today, the Statement could adjust its statement to emphasise that rates are at the upper end of its range of estimates of neutral ("MNI SOURCES: ECB Likely To Adjust Or Remove 'Restrictive'")
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 1.8bps at 1.748%, 5-Yr is down 2.9bps at 2.061%, 10-Yr is down 2.5bps at 2.509%, and 30-Yr is down 0.1bps at 2.914%.
- UK: The 2-Yr yield is up 1.2bps at 3.974%, 5-Yr is down 1.7bps at 4.093%, 10-Yr is down 4.5bps at 4.603%, and 30-Yr is down 6.7bps at 5.36%.
- Italian BTP spread up 0.5bps at 118.7bps / Spanish down 0.5bps at 70.1bps
