Cosan S.A. — 2020 Form 20-F Summary
Reporting period and context. This is an annual report for the fiscal year ended December 31, 2020, not a standalone fourth-quarter filing; the supplied filing does not provide a clear set of Q4-only consolidated financial results. The statements are in Brazilian reais (R$) and prepared under IFRS. They are the audited consolidated statements of Cosan Limited, Cosan S.A.’s predecessor parent, rather than standalone Cosan S.A. statements. Cosan Limited and Cosan Logística merged into Cosan S.A. on January 22, 2021, after the reporting date.
The group’s activities include rail logistics, natural-gas distribution and energy trading, lubricants, and interests in the 50/50 Shell joint ventures Raízen Combustíveis and Raízen Energia. Those joint ventures are accounted for using the equity method, so their operating sales are not included in consolidated net sales.
Key financial metrics
Amounts are in R$ millions unless otherwise indicated. FY2020 comparisons are with FY2019.
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Net sales | 20,437.8 | 20,611.4 | -0.8% |
| Gross profit / gross margin | 5,936.1 / 29.1% | 6,451.2 / 31.3% | Profit -8.0% |
| Profit before tax | 1,991.0 | 3,661.9 | -45.6% |
| Profit from continuing operations | 1,488.3 | 2,882.3 | -48.4% |
| Profit attributable to owners | 859.5 | 1,316.3 | -34.7% |
| EBITDA, as reported in segment reconciliation | 6,315.8 | 7,917.4 | -20.2% |
| Net cash from operating activities | 5,656.9 | 6,296.7 | -10.2% |
| Net cash used in investing activities | (4,523.1) | (130.6) | Greater outflow |
| Net cash from / (used in) financing activities | 3,686.3 | (1,558.4) | Turned positive |
| Cash and cash equivalents | 13,642.9 | 8,472.3 | +61.0% |
| Cash plus marketable securities | 17,312.0 | 11,587.8 | +49.4% |
| Gross loans, borrowings and debentures | 42,249.5 | 29,052.2 | +45.4% |
| Net debt, company-defined non-GAAP | 17,629.9 | 14,332.6 | +23.0% |
| Working capital | 10,887.9 | 7,074.6 | +53.9% |
Gross debt included R$4,929.1 million due within one year. The filing reports R$737.4 million in unused credit lines at year-end, subject to contractual conditions. Debt was 59.0% U.S.-dollar denominated; the real depreciated 28.9% against the U.S. dollar during 2020. Net debt is a non-IFRS measure and includes debt-related derivatives in its calculation.
Operating indicators included 61.4 million tonnes of sugarcane crushed (59.8 million in 2019), 4.4 million tonnes of sugar produced (3.8 million), and 2.5 billion liters of ethanol produced (unchanged). Fuel sales volume fell to 29.2 billion liters from 33.6 billion. Rumo transported 62.5 billion TKU versus 60.1 billion.
Material changes versus FY2019
- Consolidated sales were broadly flat, but gross profit and operating profit before equity earnings, financing and tax declined; higher general and administrative expenses and lower earnings from joint ventures weighed on results.
- Equity earnings of joint ventures fell to R$583.0 million from R$1,131.4 million. Raízen Combustíveis’ reported 100% net sales fell 14.1% to R$86.4 billion as fuel demand was affected by the pandemic. Raízen Energia’s reported 100% net sales rose 9.8% to R$31.7 billion, supported by substantially higher sugar sales and export prices.
- Gas and Energy sales decreased 4.4% to R$9.1 billion; natural-gas distribution sales declined 12.6%, partly offset by the launch of electricity trading. Moove sales increased 9.1% to R$4.4 billion. Logistics sales decreased 1.7% to R$7.0 billion.
- Finance results remained a net expense of R$2.0 billion. The filing highlights increased interest on debt and a significant negative foreign-exchange movement, partly offset by derivative gains; the net foreign-exchange line was a loss of R$3.3 billion versus R$0.5 billion in 2019.
- Capital expenditure, including acquisitions, increased to R$4.0 billion from R$2.8 billion. Operating cash flow decreased, while investing outflows rose sharply, reflecting lower joint-venture dividends, marketable-security movements and capital spending.
Outlook, risks and unusual items
- Outlook: The filing gives no consolidated earnings or revenue guidance. Management expected COVID-19 and government responses to continue affecting demand, suppliers and economic conditions, and said the duration and impact were uncertain. Comgás expected approximately R$1.181 billion of 2021 investment. Management stated that current working capital was sufficient for present requirements and expected to meet potential shortfalls through borrowing, shareholder contributions or capital-market issuance.
- COVID-19: Restrictions reduced fuel demand and affected aviation, industrial gas and some logistics volumes. Management reported resilient Brazilian diesel demand and recovery in some activities late in 2020. The group drew approximately R$8.223 billion from financing facilities during 2020 to strengthen liquidity.
- Corporate actions: The January 2021 reorganization made Cosan S.A. the group’s holding company. In February 2021, Raízen agreed to acquire up to 100% of Biosev, involving cash and share consideration; closing remained subject to conditions. These are subsequent events, not FY2020 operating results.
- Debt and currency: Increased gross and net debt, foreign-currency exposure, interest rates, refinancing access and restrictive covenants are key risks. The company reported compliance with covenants at year-end. Rumo’s reported gross indebtedness was R$19.9 billion, up from R$11.7 billion in 2019.
- Legal and regulatory exposures: Provisions for probable legal losses were R$1.361 billion. Possible-loss proceedings totaled R$19.836 billion, with no provision recorded for those matters. Risks include tax, labor, environmental and concession disputes, including rail and port concessions and gas tariff reviews.
- Cybersecurity: A March 2020 ransomware attack caused a partial, temporary operational interruption. The filing reports approximately R$7 million spent in connection with the attack, additional security measures, and no identified material impact on the financial statements; future claims, penalties or operational impacts remain uncertain.
- Unusual expenses and accounting matters: General and administrative expenses included R$246.9 million related to accelerated vesting of Cosan Limited share-based awards associated with the merger. The auditor issued an unqualified opinion and identified critical audit matters involving unbilled gas revenue, gas-concession infrastructure assets, the Malha Paulista concession renewal and joint-venture investments.
Most important facts for investors to verify
- Confirm that FY2020 consolidated financials are predecessor Cosan Limited group statements and understand the 2021 merger’s effect on future comparability and share counts.
- Reconcile debt, net debt, derivatives and currency exposure, including maturities, covenant headroom and the extent of effective hedging.
- Review the R$19.836 billion of possible-loss proceedings, the R$1.361 billion provision, and the status of major concession and tariff disputes.
- Assess whether operating cash flow and liquidity can support higher investment and debt service if pandemic-related demand weakness or refinancing constraints persist.
- Verify completion, financing and expected economics of the proposed Biosev acquisition, and monitor the group’s post-merger reporting and any material cyber-incident developments.