EM LATAM CREDIT: Cosan: 2Q 2025 Earnings - Negative
(CSANBZ; Ba2neg/BB/BB)
Brazil holding company Cosan reported mixed results similar to last quarter, with most of the subsidiaries showing solid performance while its ethanol processing subsidiary Raizen continued to disappoint. Overall, EBITDA fell 17% YoY and net debt leverage rose to 3.4x which was up from 2.7x a year ago and 2.8x last quarter.
Raizen EBITDA declined 23% as we reported yesterday, due to poor hydrological conditions, wildfires and below-average rainfall that led to less sugarcane being crushed. Please see the link for more information:
https://mni.marketnews.com/4oC6Vit
Rumo, Cosan's railroad subsidiary with a monopolistic business position in the Northern region of Brazil, reported a 6% growth in EBITDA from higher transport volumes. EBITDA at Compass, the natural gas distribution subsidiary, fell 12% YoY but 2Q 2024 had some one-off effects and ytd EBITDA rose 11% so overall the business was deemed to be operating well.
Cosan gross debt on a consolidated basis including subsidiary debt rose 22% YoY and 14% QoQ while LTM EBITDA fell 5% YoY and declined 5% QoQ, resulting in an increase to 3.4x net debt leverage, a significant increase YoY and QoQ.
The company has announced an intent to make non-core asset sales to reduce debt as well as signaled capital raising discussions that are being held with stakeholders of Raizen, which is a JV with Shell 50/50. The asset sales are expected to take a while and the capital increase discussions are at an early stage but would likely result in Cosan reducing its position in Raizen.
CSANBZ 2031s were last quoted T+262bp, 11bp wider QTD and 43bp tighter YTD.
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