Low sugar prices could cause Brazil mergers-Cosan
( Reuters ) - Current low sugar and ethanol prices could encourage a new wave of consolidation in this sector as most companies will be weakened, Brazil's biggest sugar and ethanol producer Cosan said on Friday.
Despite a rise in net profit, Cosan late on Thursday posted net operating revenues of 591.7 million reais ($311 million) for its first fiscal quarter (May-July), down 37 percent compared with a year ago.
Results were hit by a drop in sugar and ethanol prices, the appreciation of the Brazilian real against the dollar and unseasonal rains which forced mills to interrupt harvesting during the quarter.
International sugar prices have more than halved from a 25-year peak of almost 20 cents a lb in February 2006 as world output rose in response to high prices, mainly in Brazil and India. Cane-based ethanol has been pressured as well.
"On one hand this imbalance should bring serious consequences to this crop, but on the other hand, it should contribute to a better natural selection of the producers," Cosan's financial vice president, Paulo Diniz, said in a conference call.
"A second wave of consolidation in the industry may ensue, with some remaining players becoming stronger, but the great majority considerably weaker," he added.
Diniz said the current surplus in the world market is not restricted to sugar, but also includes ethanol.
But low prices will not affect Cosan's investment plans, including possible projects outside Brazil, as long-term prospects remain positive, Diniz said.
The company expects to become the world's No.1 renewable energy company. To achieve that, it intends to more than double its crushing capacity to between 80 million and 100 million tonnes, compared with 40 million tonnes now, he added.