Table of Contents

 

 

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 May 2017

Commission File Number: 1-33659

 

 

COSAN LIMITED

(Translation of registrant’s name into English)

 

 

Av. Juscelino Kubitschek, 1327 – 4 th 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  ☒            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  ☒

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  ☒

 

 

 


Table of Contents

LOGO

 

1Q17 Earnings Release

São Paulo, May  10, 2017 COSAN LIMITED (“CZZ” or “Company”) (NYSE: CZZ and BM&FBovespa: CZLT33) announces today its results for the first quarter (January, February and March) of 2017 (1Q17). The results are presented on a consolidated basis, in accordance with the accounting practices adopted in Brazil and with International Financial Reporting Standards (IFRS). Comparisons in this report take into consideration 1Q17 and 1Q16, except where indicated differently.

Summary of Financial Information

 

 

 

Executive Summary - Cosan Pro forma¹    1Q17      1Q16      Chg.%     4Q16     Chg.%  

BRL mln

   (Jan-Mar)      (Jan-Mar)      1Q17/1Q16     (Oct-Dec)     1Q17/4Q16  

Net Revenue

     12,742.7        12,947.5        -1.6     13,043.7       -2.3

Gross profit

     1,642.4        2,044.3        -19.7     1,578.3       4.1

EBIT

     729.2        1,211.7        -39.8     703.8       3.6

EBITDA

     1,458.8        1,953.9        -25.3     1,696.5       -14.0

Net Income

     21.1        130.3        -83.8     (34.9     n/a  

Note 1: Considering 50% of the results of Raízen Combustíveis and Raízen Energia

Message from the CEO

 

 

This year began with initial hints of upswing in economy. The challenge of approving the reforms required to ensure that Brazilian economy continues to improve on a sustainable basis, however, withstand. While unemployment remains high, inflation and interest rates continue to decline, and a few segments of the economy, such as automotive production, showed first signs of improvement. The outlook for grain crops is positive, benefitting exports and trade balance.

Our energy portfolio reacted to the economic upturn in the first quarter of 2017. Gasoline equivalent sales grew 1% in the country (ANP base), after a long period of consumption shrinkage, and Raízen Combustíveis outperformed again the industry average. For the second consecutive quarter, industrial natural gas consumption enjoyed a slight recovery and Comgás continue growing in residential and commercial segments, with positive effects on results. We ended the 2016/17 sugarcane crop evidencing our capacity to capture efficiencies in the production and industrial processes, which, coupled with a scenario of more favorable prices and capital allocation discipline, allowed for a significant increase in cash generation at Raízen Energia.

Rumo keeps on increasing capacity and reducing cost, delivering EBITDA growth despite 1Q16 strong basis of comparison. The atypical demand for corn transportation that boosted 1Q16 did not happen in 1Q17. Rumo EBITDA increased on the back of the implementation of the Company’s Capex plan, resulting in higher market share of grain transportation to the Port of Santos (+6 p.p.). The outlook for the upcoming quarters remains positive, especially when it comes to soybean and corn crops. Soybean harvest has been confirming expectations so far, while corn planting happened under favorable conditions for crop productivity.

Finally, our business portfolio, which proved to be highly resilient to the crisis over the last two years, show its ability to capture a potential upturn in the economy, strengthening our confidence in delivering the growth embedded in our 2017 guidance.

 

Investors Relation

   LOGO

E-mail: ri@cosan.com.br

Telefone: +55 11 3897-9797

Website:ri.cosanlimited.com

  

 

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Table of Contents
COSAN LIMITED    Earnings Release
    

1st Quarter of the Fiscal Year of 2017

 

 

Business Units

 

The Company’s subsidiaries Cosan S/A Indústria e Comércio (BM&FBovespa CSAN3) and Cosan Logístisca S/A

(BM&FBovespa RLOG3) reported their results on the same date. The full Earnings Releases with main financial and operational information, in addition to the quarterly financial statements, can be found at:

 

    Cosan S/A (CSAN3): http:/ir.cosan.com.br

 

    Cosan Logística (RLOG3 and RUMO3): http://ir.rumolog.com

Cosan S/A and Cosan Logística S/A business units that compose Cosan Limited and interest in each reportable segment are shown below:

 

    Cosan S.A. (CSAN3)

 

Raízen Combustíveis (50%)

   Fuel Distribution

Raízen Energia (50%)

   Sugar, Ethanol and Cogeneration

Comgás (62.6%)

   Natural Gas Distribution

Moove (100%)

   Lubricants, Basic Oils and Specialties

Cosan Corporativo (100%)

   Corporate Structure and Other Investments

•    Cosan Logística S.A. (RLOG3)

  

Rumo Logística (RUMO3)

   Logistic Operator

Executive Summary 1Q17

 

Cosan S.A. (CSAN3):

Cosan S/A Pro forma: Adjusted EBITDA was R$1.1  billion in 1Q17 (-4%), since favorable results of Raízen Combustíveis and Comgás were partially offset by lower accounting profit of Raízen Energia, which was affected by foreign exchange (non-cash effect). Including the effect of currency hedge on sugar exports, adjusted EBITDA would have been R$1.2  billion (+8%). We ended the 2016/17 sugarcane crop evidencing our capacity to capture production efficiencies, which coupled with the favorable price scenario, enabled a substantial increase of cash generation, with the currency hedge accounted as financial gain. At Raízen Combustíveis, we continued to focus on service stations network expansion and maintenance, privileging long-term relationship with our dealers and optimizing our supply and commercialization strategy. At Comgás, the beginning of 2017 recorded a small recovery in the industrial consumption, while residential and commercial segments continue growing through new connections. At Moove, we outperformed the industry average in Brazil again and increased sales volumes at international operations. With better operating results, the pro forma Cash Flow from Operating Activities (CFO) came to R$2.2 billion (+4%), while Free Cash Flow to Equity (FCFE) totaled R$139 million. Leverage (proforma Net Debt/EBITDA) reached 2.0 times at the end of the period, excluding Comgás’ regulatory current account effects.

Raízen Combustíveis: Adjusted EBITDA grew 16% to R$682  million in 1Q17. The expansion reflects higher volume sold with a better sales mix, coupled with continued gains from the supply and commercialization strategy and cost reductions. The fuel distribution market in Brazil started 2017 with lower drop of consumption when compared to last quarters. Total volume sold fell 1% in 1Q17 (ANP data). Sales of gasoline equivalent showed signs of recovery, growing 1% in the country (ANP base). Raízen’s sales outperformed the industry average, going up 1% in total, while Otto cycle sales increased 3% year-on-year (4% in gasoline equivalent). Diesel sold by Raízen was up 3% in the quarter driven by new agreements with industrial clients.

Raízen Energia: Adjusted EBITDA (excluding biological asset variation, debt hedge accounting and non-recurring effects) came to R$751  million (-36%) in 1Q17, mainly affected by (i)  lower concentration of sales in the period, (ii)  higher CONSECANA and (iii)  lower foreign exchange rate in the period, despite improved sugar sales average price. The 2016/17 crop year ended with total crushing of 59.4 million tons of sugarcane (-5%), affected by lower productivity compared with previous crop (TCH reduction due to lower rainfall volume, partially offset by slightly improved TRS). Sales volume in sugar equivalent dropped 4%, offset by higher sugar and ethanol sales average prices. The unit average cash cost, excluding the effects from CONSECANA, was 2% lower in the 2016/17 crop, absorbing inflation and evidencing efficiency gains in the productive and industrial processes. Adjusted EBITDA of the crop year was R$3.1 billion (-11%). Including the effect of currency hedge on sugar exports, adjusted EBITDA would have been R$3.7 billion versus R$3.0 billion in previous crop year. 2016/17 CAPEX was up 18% to R$2.1 billion, in line with guidance.

Comgás: EBITDA, normalized by regulatory current account effect, was R$384  million (+19%) in 1Q17, reflecting volume growth (3% ex thermal) and margins correction by inflation (9.8%) in May 2016. Sales volume in the industrial segment was up 3% year-on-year, due to higher consumption of few industries and weak basis of comparison.

 

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COSAN LIMITED    Earnings Release
    

1st Quarter of the Fiscal Year of 2017

 

 

Commercial sales volume was up 5% year-on-year, chiefly due to the addition of new clients in the last 12 months. The residential segment ended the quarter with modest 1% growth, since results from client base expansion were offset by lower unit consumption due to higher average temperature in the period. The regulatory current account recorded a R$60 million reduction during the quarter and ended the period with a balance of R$354 million in favor of clients.

Moove: EBITDA in 1Q17 was up 67% to R$43 million, as a result of higher volume sold (+6%) and better sales mix . Moove outperformed Brazilian lubricant market (-1%) reporting a 1% increase compared to the same period last year (SINDICOM data).

Cosan Logística S.A. (RLOG3):

Rumo’s EBITDA was up 11% to R$493  million in 1T17 year-on-year. Even though the atypical demand for corn transportation in

1Q16 was not seen again in 1Q17, Rumo recorded EBITDA growth as a result of implementation of the Company’s Capex plan.

With increased capacity, in 1Q17 the Company recorded total volume close to the volume transported in the same period last year. The higher volume of soybean transported in February and March offset the lower demand of corn in January. In addition, variable costs decreased and fixed costs added to selling, general and administrative expenses increased below inflation, besides tariff contractual adjustments. As a result, EBITDA margin climbed from 38% in 1Q16 to 41% in 1Q17.

Cosan Limited Pro Forma : Adjusted EBITDA reached R$1.7  billion this quarter (+5%), due to better results from Raízen Combustíveis, Comgás and Rumo, partially offset by lower accounting profit from Raízen Energia, strongly affected by foreing exchange (non-cash effect). Cosan Limited closed the quarter with a R$ 109 million net loss.

The following tables present the key operating and financial metrics of our businesses. Historical data for the information presented can be found on our Investor Relations website (ir.cosan.com.br) in the Results Center.

 

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COSAN LIMITED    Earnings Release
    

1st Quarter of the Fiscal Year of 2017

 

 

Main Operational and Financial Metrics

 

Raízen Combustíveis

 

     1Q17      1Q16      Chg.%     4Q16      Chg.%  
     (Jan-Mar)      (Jan-Mar)      1Q17/1Q16     (Oct-Dec)      1Q17/4Q16  

Otto Cycle Volume (Gasoline+ Ethanol) (‘000 cbm)

     2,900        2,822        3     3,060        -5

Gasoline Equivalent 2 Volume (‘000 cbm)

     2,755        2,636        4     2,883        -4

Diesel Volume (‘000 cbm)

     2,625        2,538        3     2,638        0

Adjusted EBITDA Margin 3 (BRL/cbm)

     111        97        15     142        -21

Adjusted EBIT 3 (BRL/cbm)

     87        69        25     115        -25

Note 2: Sum of gasoline and ethanol volumers, adjusted by the energy coefficient of 0,7221.

Note 3: Excludes non-recurring items

Raízen Energia

 

     1Q17      1Q16     Chg.%     2016/17     2015/16     Var.%  
     (Jan-Mar)      (Jan-Mar)     1Q17/1Q16     (Apr-Mar)     (Apr-Mar)     16/17x15/16  

Sugarcane Crushed (mln mt)

     —          2.8       -100     59.4       62.7       -5

Average TRS (kg/tons)

     n/a        109.9       n/a       129.4       127.6       1

TRS/ha

     n/a        10.3       n/a       10.3       11.4       -10

Sugar/Ethanol Production Mix

     n/a        51% x 49     n/a       57% x 43     55% x 45     n/a  

Adjusted EBITDA 4 (BRL mln)

     751        1,168       -36     3,092       3,459       -11

Adjusted EBIT 4 /TRS sold (BRL/ton)

     142        179       -21     119       143       -17

Note 4: Excludes non-recurring effects

             

Comgás

 

     1Q17      1Q16      Chg.%     4Q16      Chg.%  
     (Jan-Mar)      (Jan-Mar)      1Q17/1Q16     (Oct-Dec)      1Q17/4Q16  

Total Sales Volume (cbm) Ex-Thermal

     1,008        974        3     1,047        -4

Normalized EBITDA 5 (BRL mln)

     384        323        19     359        7

IFRS EBITDA (BRL mln)

     313        520        -40     308        2

Note 5: Includes the effect from the regulatory Current Account.

Moove

 

     1Q17      1Q16      Chg.%     4Q16      Chg.%  
     (Jan-Mar)      (Jan-Mar)      1Q17/1Q16     (Oct-Dec)      1Q17/4Q16  

Total Sales Volume (‘000 cbm)

     81        77        6     81        0

EBITDA (BRL mln)

     43        26        67     46        -6

Rumo Logística

 

Operational and Financial Performance Indicators    1Q17     1Q16     Chg.%     4Q16     Chg.%  
     (Jan-Mar)     (Jan-Mar)     1Q17/1Q16     (Oct-Dec)     1Q17/4Q16  

Consolidated

          

Operating Ratio

     83.0     86.0     -3.5     95.0     -12.6

Diesel Comsuption (Liters 000’ TKB)

     4.6       4.8       2     4.9       -6

North Operation

          

Grains from Rondonópolis (MT) to Port of Santos (SP)

          

Average number of freight cars loaded per day (units)

     369       395       -7     97       n/a  

Transit time (hours)

     107.1       100.2       7     96.7       11

Cycle time of freight cars (days)

     10.2       10.8       -6     11.0       -7

Operação Sul

          

Grains from terminals in North of Paraná to Port of Paranaguá (PR) and São Francisco do Sul (SC)

 

   

Average number of freight cars loaded per day (units)

     277       355       -89     36       n/a  

Transit time (hours)

     57.9       49.3       5     47.6       22

Cycle time of freight cars (days)

     7.6       8.4       -4     7.8       -3

 

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COSAN LIMITED

Earnings Release

    

1st Quarter of the Fiscal Year of 2017

 

 

Cosan Corporate Results

The following table provides a breakdown of the 1Q17 results by business unit for all segments detailed previously. All information reflects 100% of their financial performance, regardless of the interest held by Cosan. For the purpose of reconciling EBITDA in the column “Cosan S/A Accounting”, the “Adjustments & Eliminations” column reflects the eliminations from operations among all Cosan subsidiaries for consolidation purposes.

 

Earnings by
Business Unit
1Q17

   Raízen
Combustíveis
    Raízen
Energia
    Comgás     Moove     Cosan
Corporate
    50%
Raízen
    Adjustments
and
Elimination
    Cosan S/A
Accounting
    Cosan
Logistica
    Cosan Limited
(Parent
Company)
    Adjustments
and
Elimination
    Consolidated
Pro forma
 

Net Revenue

     17,698.2       2,913.2       1,146.3       446.7       0.2       (20,611.4     —         1,593.1       1,199.2       0.0       (6.6     2,785.7  

Cost of Goods and Services Sold

     (16,746.9     (2,232.1     (720.1     (314.0     (1.1     18,979.1       —         (1,035.2     (930.9     —         6.6       (1,959.4

Gross Profit

     951.2       681.1       426.1       132.7       (0.9     (1,632.3     —         558.0       268.3       0.0       0.0       826.3  

Gross Margin (%)

     5.4     23.4     37.2     29.7     n/a       7.9     n/a       35.0     22.4     n/a       —         29.7

Selling Expenses

     (314.1     (144.3     (167.8     (87.4     (0.1     458.4       —         (255.2     (2.4     —         —         (257.6

General and Administrative Expenses

     (116.2     (158.8     (77.1     (20.2     (39.6     275.0       —         (136.9     (63.3     (7.1     —         (207.4

Other Operating Income (Expenses)

     (45.8     (85.3     (0.6     0.1       (13.4     131.1       —         (13.8     (2.2     —         —         (16.0

Equity Pick-up

     —         (37.3     —         (1.6     312.0       37.3       (53.5     256.9       1.7       76.5       (76.5     258.7  

Depreciation and Amortization

     150.2       448.7       132.7       19.7       4.2       (598.9     —         156.6       290.0       —         —         446.6  

EBITDA

     625.3       704.2       313.4       43.3       262.2       (1,329.5     (53.5     565.5       492.2       69.3       (76.5     1,050.5  

EBITDA Margin (%)

     3.5     24.2     27.3     9.7     n/a       6.5     n/a       35.5     41.0     n/a       0.0     37.7

Financial result

     (172.1     135.1       (41.4     (19.8     (73.8     37.1       —         (135.0     (451.2     (32.1     —         (618.4

Income and Social Contribution Taxes

     (89.4     (77.6     (55.7     (2.7     21.1       167.0       —         (37.3     0.2       (6.7     —         (43.8

Non-controlling Interest

     (13.7     —         —         —         —         13.7       (31.2     (31.2     177.9       (9.4     (57.9     79.4  

Net Income

     199.9       312.9       83.5       1.1       205.3       (512.8     (84.7     205.3       (71.0     21.1       (134.4     21.1  

 

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COSAN LIMITED

Earnings Release

    

1st Quarter of the Fiscal Year of 2017

 

 

Loans and Financing

At the close of the 1Q17, Cosan Limited’s (parent company) gross debt was R$ 704 million (+4%), without changes throughout the quarter, varying only according to the exchange rate.

Cash and cash equivalents ended the 1Q17 at R$ 228 million, compared to R$ 248 million at the close of previous quarter. The reduction can be explained by provision for interest (Accrual).

Net debt ended the quarter at R$ 475.8 million.

 

Loans and Financing 1Q17
BRL mln

   Comgás     Moove     Cosan
Corporate
    Consolidated     Raízen
Energia
    Raízen
Combustíveis
    Consolidated
Pro forma
    Cosan
Logística
    CZZ
Corporate
     CZZ
Pro forma
 

Opening balance of pro forma net debt

     1,322.1       283.7       2,698.0       4,303.9       3,583.8       406.4       8,294.2       7,350.9       429.1        16,074.1  

Cash, cash equivalents and marketable securities

     2,310.8       214.8       1,836.5       4,362.1       1,393.8       378.6       6,134.5       1,181.0       248.1        7,563.5  

Gross Debt

     3,632.9       498.5       4,534.5       8,666.0       4,977.6       785.0       14,428.6       8,531.8       677.2        23,637.6  

Cash items

     (140.6     (55.5     (285.1     (481.2     (636.7     (6.4     (1,124.4     2,047.3       —          922.9  

Funding

     9.0       —         88.2       97.2       765.5       —         862.7       2,388.5       —          3,251.2  

Payment of principal on loans and borrowings

     (118.0     (42.6     (76.1     (236.7     (1,358.9     (2.0     (1,597.5     (202.5     —          (1,800.1

Payment of Interest on loans borrowings

     (35.9     (1.0     (136.9     (173.8     (43.4     (4.5     (221.6     (139.5     —          (361.1

Derivatives

     4.3       (11.9     (160.4     (167.9     —         —         (167.9     0.8       —          (167.1

Noncash items

     104.6       6.4       49.5       160.5       283.3       (77.4     366.4       312.6       26.5        705.5  

Provision for interest (accrual)

     60.3       4.3       79.8       144.4       78.5       4.5       227.3       239.4       25.8        492.5  

Monetary variation and MTM adjustment of debt

     27.8       9.5       178.6       215.9       11.6       (2.8     224.6       16.2       0.7        241.5  

Exchange variation, net of derivatives

     16.6       (7.4     (208.9     (199.7     193.2       (79.0     (85.5     57.0       0.0        (28.5

Closing balance of gross debt

     3,597.0       449.4       4,298.9       8,345.3       4,624.2       701.2       13,670.7       10,891.7       703.7        25,266.1  

Cash, cash equivalents and marketable securities

     2,012.4       82.4       2,010.8       4,105.6       1,718.8       258.9       6,083.3       3,133.5       227.8        9,444.6  

Closing balance of pro forma net debt

     1,584.6       367.0       2,288.1       4,239.7       2,905.4       442.3       7,587.4       7,758.2       475.8        15,821.4  

Obligations due to preferred shareholders of subsidiaries

     —         —         1,809.2       1,809.2       —         —         1,809.2       —         —          1,809.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total pro forma net debt and obligations due to preferred shareholders of subsidiaries

     1,584.6       367.0       4,097.2       6,048.9       2,905.4       442.3       9,396.6       7,758.2       475.8        17,630.6  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

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COSAN LIMITED

Earnings Release

    

1st Quarter of the Fiscal Year of 2017

 

 

Cash Flow Reconciliation

 

Cash Flow Statement
BRL mln

   Comgás     Moove     Cosan
Corporate
    1Q17
Eliminations
    Cosan S/A     Raízen
Combined
    Eliminations     Cosan S/A
Pro forma
    Cosan
Logística
    CZZ
Corporate
    Eliminations     CZZ
Pro forma
 

EBITDA

     313.4       43.3       262.2       (53.5     565.5       664.7       (256.4     973.8       492.2       69.3       (76.5     1,458.8  

Noncash impacts on EBITDA

     11.6       6.5       (296.8     53.5       (225.3     124.7       256.4       155.8       64.1       (75.3     76.5       221.1  

Changes in assets and liabilities

     (54.7     (115.5     190.3       (21.7     (1.5     773.9       —         772.4       27.3       0.5       1.6       801.8  

Operating financial result

     62.1       0.8       38.3       —         101.2       152.4       —         253.5       (16.0     0.8       —         238.4  

Operating Cash Flow

     332.4       (64.9     194.0       (21.7     439.9       1,715.7       —         2,155.6       567.6       (4.7     1.6       2,720.1  

CAPEX

     (68.7     (1.7     (0.3     —         (70.8     (574.3     —         (645.0     (471.9     —         —         (1,116.9

Other

     —         —         (275.8     —         (275.8     19.0       —         (256.8     (17.1     (0.0     —         (273.9

Cash Flow from Investing Activities

     (68.7     (1.7     (276.1     —         (346.5     (555.3     —         (901.8     (489.0     (0.0     —         (1,390.9

Funding

     9.0       —         88.2       —         97.2       765.5       —         862.7       2,388.5       —         —         3,251.2  

Loans amortization (Principal)

     (118.0     (42.6     (76.1     —         (236.7     (1.360.8     —         (1,597.5     (313.6     —         —         (1,911.1

Loans amortization (Interest)

     (35.9     (1.0     (136.9     —         (173.8     (50.3     —         (224.1     (220.0     —         —         (444.1

Derivatives

     4.3       (11.9     (160.4     —         (167.9     —         —         (167.9     0.8       —         —         (167.1

Other

     —         (9.2     23.6       —         14.4       (2.8     —         11.6       (31.7     0.0       (1.6     (21.6

Cash Flow from Financing Activities

     (140.6     (64.6     (261.5     —         (466.7     (648.5     —         (1,115.2     1,824.0       0.0       (1.6     707.2  

Dividends received

     —         —         526.6       (246.7     279.9       —         (279.9     —         2.5       —         —         2.5  

Free Cash Flow to Equity

     123.1       (131.3     183.0       (268.4     (93.6     511.9       (279.9     138.5       1,905.0       (4.7     —         2,038.8  

Cosan S.A

     —         —         —         —         —         (300.1     279.9       (20.2     —         (8.3     —         (28.5

Comgás

     (421.6     —         —         268.4       (153.2     —         —         (153.2     —         —         —         (153.2

Non-controlling Shareholders

     —         —         —         —         —         —         —         —         —         —         —         —    

Dividends paid

     (421.6     —         —         268.4       (153.2     (300.1     279.9       (173.4     —         (8.3     —         (181.7

Exchange variation impact on cash and cash equivalents

     —         (1.1     (8.6     —         (9.7     (6.5     —         (16.2     47.5       (7.3     —         24.0  

Cash Generation (Burn) in the Period

     (298.4     (132.4     174.4       —         (256.5     205.3       —         (51.1     1,952.5       (20.3     —         1,881.1  

 

7 de 64

 

 


Table of Contents

Financial Statements

Cosan Limited - Accounting

 

 

 

Indicators

BRL mln

   1Q17
(Jan-Mar)
    1Q16
(Jan-Mar)
    Chg.%
1Q17/1Q16
    4Q16
(Oct-Dec)
    Chg.%
1Q17/4Q16
 

EBITDA

     1,050.5       1,342.9       -21.8     1,080.0       -2.7

CAPEX

     549.5       422.5       30.0     763.8       -28.1
Income Statement for the Period    1Q17     1Q16     Chg.%     4Q16     Chg.%  

BRL mln

   (Jan-Mar)     (Jan-Mar)     1Q17/1Q16     (Oct-Dec)     1Q17/4Q16  

Net Revenue

     2,785.7       3,119.1       -10.7     2,785.9       0.0

Cost of Goods and Services Sold

     (1,959.4     (2,066.1     -5.2     (2,219.7     -11.7

Gross profit

     826.3       1,053.0       -21.5     566.2       45.9

Selling, general & administrative expenses

     (465.0     (464.8     0.0     (548.8     -15.3

Other net operating income (expenses)

     (16.0     (37.4     -57.1     (33.1     -51.5

Financial results

     (618.4     (811.1     -23.8     (718.2     -13.9

Equity Pick-up

     258.7       439.8       -41.2     464.3       -44.3

Expenses with income and social contribution taxes

     (43.8     (15.4     n/a       87.7       n/a  

Non-controlling interest

     79.4       (48.8     n/a       241.2       -67.1

Discontinued operations

     —         15.0       -100.0     (94.1     -100.0

Net Income (Loss)

     21.1       130.3       -83.8     (34.9     n/a  

 

Balance Sheet

BRL mln

   1Q17
03/31/2017
     4Q16
12/31/2016
 

Cash and cash equivalents

     6,544        4,500  

Marketable Securities

     923        1,292  

Trade accounts receivable

     999        1,131  

Inventories

     600        631  

Derivative financial instruments

     836        751  

Other current assets

     806        1,196  

Other non-current assets

     4,447        4,341  

Investments

     9,021        8,793  

Property, plant and equipment

     10,927        10,726  

Intangible assets

     16,997        17,109  

Total Assets

     52,099        50,470  

Loans and borrowings

     20,441        18,338  

Financial instruments and derivatives

     337        296  

Trade accounts payable

     1,927        2,033  

Payroll

     162        238  

Other current liabilities

     1,718        1,914  

Other non-current liabilities

     11,763        11,641  

Shareholders’ Equity

     15,752        16,010  

Total Liabilities

     52,099        50,470  


Table of Contents

Financial Statement including Raízen

Cosan Limited Proforma (including 50% of Raízen)

 

 

 

Indicators

BRL mln

   1Q17
(Jan-Mar)
    1Q16
(Jan-Mar)
    Chg.%
1Q17/1Q16
    4Q16
(Oct-Dec)
    Chg.%
1Q17/4Q16
 

EBITDA

     1,458.8       1,953.9       -25.3     1,696.5       -14.0

CAPEX

     1,075.3       848.6       26.7     1,022.5       5.2

Income Statement for the Period

BRL mln

   1Q17
(Jan-Mar)
    1Q16
(Jan-Mar)
    Chg.%
1Q17/1Q16
    4Q16
(Oct-Dec)
    Chg.%
1Q17/4Q16
 

Net Revenue

     12,742.7       12,947.5       -1.6     13,043.7       -2.3

Cost of Goods and Services Sold

     (11,100.2     (10,903.2     1.8     (11,465.4     -3.2

Gross profit

     1,642.4       2,044.3       -19.7     1,578.3       4.1

Selling, general & administrative expenses

     (831.7     (869.8     -4.4     (942.6     -11.8

Other net operating income (expenses)

     (81.6     37.2       n/a       68.1       n/a  

Financial results

     (636.9     (772.9     -17.6     (774.9     -17.8

Equity Pick-up

     (16.5     (13.6     20.7     13.2       n/a  

Expenses with income and social contribution taxes

     (127.3     (256.0     -50.3     (82.6     54.2

Non-controlling interest

     72.6       (53.9     n/a       199.8       -63.7

Discontinued operations

     —         15.0       -100.0     (94.1     -100.0

Net Income (Loss)

     21.1       130.3       -83.8     (34.9     n/a  

 

Balance Sheet

BRL mln

   1Q17
03/31/2017
     4Q16
12/31/2016
 

Cash and cash equivalents

     8,522        6,272  

Marketable Securities

     923        1,292  

Trade accounts receivable

     1,951        2,548  

Inventories

     1,771        2,832  

Derivative financial instruments

     1,154        1,462  

Other current assets

     2,287        2,864  

Other non-current assets

     6,057        5,891  

Investments

     356        447  

Property, plant and equipment

     17,713        17,170  

Intangible assets

     20,895        20,988  

Total Assets

     61,629        61,765  

Loans and borrowings

     26,107        24,639  

Financial instruments and derivatives

     752        1,014  

Trade accounts payable

     2,933        3,672  

Payroll

     396        442  

Other current liabilities

     2,413        2,713  

Other non-current liabilities

     13,173        13,171  

Shareholders’ Equity

     15,855        16,113  

Total Liabilities

     61,629        61,765  


Table of Contents

Cosan Limited

Consolidated interim financial statements as

March 31, 2017


Table of Contents

Cosan Limited

Consolidated interim financial statements

Contents

 

Report on review of interim financial information

     12  

Consolidated statements of financial position

     13  

Consolidated statements of profit or loss and other comprehensive income

     15  

Consolidated statements of changes in equity

     17  

Consolidated statements of cash flows

     19  

Notes to the consolidated interim financial statements

     21  

 

11


Table of Contents

Report on Review of Interim Financial Information

To the Board of Directors and Shareholders of

Cosan Limited

Bermuda

Introduction

We have reviewed the accompanying consolidated interim financial information of Cosan Limited (“Company”) contained in the Quarterly Information Form - ITR for the quarter ended March 31, 2017, which comprises the statement of financial position as of March 31, 2017, and the respective statements of profit and loss and other comprehensive income, changes in equity and cash flows for the three-month period then ended, including the footnotes.

The Company’s management is responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board - IASB. Our responsibility is to express a conclusion on this consolidated interim financial information based on our review.

Scope of review

We conducted our review in accordance with the Brazilian and International standards on review engagements of interim financial information ( NBC TR 2410 - Revisão de Informações Intermediárias Executada pelo Auditor da Entidade and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for the financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the audit standards and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion on the consolidated interim financial information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial information included in the Quarterly Information Form - ITR referred to above has not been prepared, in all material respects, in accordance with IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board - IASB.

São Paulo, May 10, 2017.

KPMG Auditores Independentes

CRC 2SP014428/O-6

Rogério Hernandez Garcia

Accountant CRC 1SP213431/O-5

 

12


Table of Contents

Cosan Limited

Consolidated statements of financial position

(In thousands of Brazilian Reais - R$)

 

     Note      March 31, 2017      December 31, 2016  

Assets

        

Cash and cash equivalents

     7        6,544,090        4,499,588  

Marketable securities

     8        922,843        1,291,580  

Trade receivables

     9        999,500        1,130,624  

Derivative financial instruments

     27        200,763        20,654  

Inventories

        599,847        630,752  

Receivables from related parties

     11        56,183        58,517  

Income tax receivable

        267,980        364,980  

Other current tax receivable

     10        211,585        178,856  

Dividends receivable

        48,440        144,160  

Other current assets

        222,093        449,298  
     

 

 

    

 

 

 

Total current assets

        10,073,324        8,769,009  

Trade receivables

     9        53,186        54,806  

Restricted cash

        225,144        200,999  

Deferred tax assets

     21        1,512,568        1,490,002  

Receivables from related parties

     11        151,496        183,740  

Income tax receivable

        199,768        121,376  

Other non-current tax receivable

     10        741,073        739,849  

Judicial deposits

     22        733,262        714,684  

Derivative financial instruments

     27        634,901        730,426  

Other non-current assets

        830,368        835,730  

Investments in associates

     12        282,455        286,947  

Investments in joint ventures

     13        8,738,568        8,506,395  

Property, plant and equipment

     14        10,926,645        10,726,448  

Intangible assets and goodwill

     15        16,996,700        17,109,439  
     

 

 

    

 

 

 

Total non-current assets

        42,026,134        41,700,841  
     

 

 

    

 

 

 

Total assets

        52,099,458        50,469,850  
     

 

 

    

 

 

 

The accompanying notes are an integral part of these consolidated interim financial statements

 

     Note      March 31, 2017      December 31, 2016  

Liabilities

        

Loans, borrowings and debentures

     16        3,049,146        2,404,009  

Leases

     17        415,476        472,632  

Real estate credit certificates

        108,780        105,422  

Derivative financial instruments

     27        21,403        40,526  

Trade payables

     19        1,926,919        2,032,542  

Employee benefits payable

        161,735        238,159  

Income tax payables

        27,779        83,113  

Other taxes payable

     20        223,348        261,169  

Concessions payables

     18        27,822        27,662  

Dividends payable

        31,315        93,500  

 

13


Table of Contents

Cosan Limited

Consolidated statements of financial position

(In thousands of Brazilian Reais - R$)

 

Payables to related parties

     11        256,008       237,081  

Deferred revenue

        17,404       14,167  

Other financial liabilities

        223,560       203,303  

Other current liabilities

        386,842       415,782  
     

 

 

   

 

 

 

Total current liabilities

        6,877,537       6,629,067  
     

 

 

   

 

 

 

Loans, borrowings and debentures

     16        17,391,644       15,934,488  

Leases

     17        839,798       924,911  

Real estate credit certificates

        62,467       90,323  

Preferred shareholders payable in subsidiaries

        1,809,176       1,769,427  

Derivative financial instruments

     27        315,213       255,318  

Trade payables

     19        573       568  

Other taxes payable

     20        156,293       153,776  

Provision for legal proceedings

     22        1,280,782       1,268,564  

Concessions payables

     18        2,674,490       2,580,144  

Post-employment benefits

     28        447,674       441,480  

Deferred tax liabilities

     21        3,639,084       3,550,565  

Deferred revenue

        63,954       62,207  

Other non-current liabilities

        788,727       799,263  
     

 

 

   

 

 

 

Total non-current liabilities

        29,469,875       27,831,034  
     

 

 

   

 

 

 

Total liabilities

        36,347,412       34,460,101  
     

 

 

   

 

 

 

Shareholders’ equity

     23       

Share capital

        5,328       5,328  

Additional paid-in capital

        3,901,232       4,051,591  

Accumulated other comprehensive loss

        (354,805     (480,454

Retained earnings

        2,717,113       2,695,998  
     

 

 

   

 

 

 

Equity attributable to:

       

Owners of the Company

        6,268,868       6,272,463  

Non-controlling interests

     12        9,483,178       9,737,286  
     

 

 

   

 

 

 

Total shareholders’ equity

        15,752,046       16,009,749  
     

 

 

   

 

 

 

Total shareholders’ equity and liabilities

        52,099,458       50,469,850  
     

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated interim financial statements

 

14


Table of Contents

Cosan Limited

Consolidated statements of profit or loss and other comprehensive income

For the three month period ended March 31, 2017 and 2016

(In thousands of Brazilian Reais – R$, except earnings per share)

 

     Note      March 31, 2017     March 31, 2016
(Restated)
 

Net sales

        2,785,732       3,119,069  

Cost of sales

        (1,959,441     (2,066,104
     

 

 

   

 

 

 

Gross profit

        826,291       1,052,965  
     

 

 

   

 

 

 

Selling expenses

        (257,582     (236,830

General and administrative expenses

        (207,374     (227,964

Other (expense) income, net

     25        (16,040     (37,354
     

 

 

   

 

 

 

Operating expenses

        (480,996     (502,148
     

 

 

   

 

 

 

Income before equity in earnings of investees and financial results

        345,295       550,817  
     

 

 

   

 

 

 

Equity in earnings of associates

     12        2,954       (1,558

Equity in earnings of joint ventures

     13        255,697       441,344  
     

 

 

   

 

 

 

Equity in earnings of investees

        258,651       439,786  

Finance expense

        (898,232     (878,868

Finance income

        283,009       246,552  

Foreign exchange gain, net

        118,889       525,404  

Derivatives

        (122,058     (704,142
     

 

 

   

 

 

 

Financial results

     26        (618,392     (811,054

(Loss) profit before taxes

        (14,446     179,549  
     

 

 

   

 

 

 

Income tax (expenses) benefits

     21       

Current

        23,567       (99,072

Deferred

        (67,396     83,651  
     

 

 

   

 

 

 
        (43,829     (15,421
     

 

 

   

 

 

 

(Loss) profit from continuing operations

        (58,275     164,128  

(Loss) profit from discontinued operation, net of tax

        —         14,952  
     

 

 

   

 

 

 

(Loss) profit for the period

        (58,275     179,080  
     

 

 

   

 

 

 

 

15


Table of Contents

Cosan Limited

Consolidated statements of profit or loss and other comprehensive income

For the three month period ended March 31, 2017 and 2016

(In thousands of Brazilian Reais – R$, except earnings per share)

 

Other comprehensive income       
Items that will never be reclassified to profit or loss       

Financial instruments - common transactions

       9,000       —    
    

 

 

   

 

 

 
       9,000       —    

Items that are or may be reclassified to profit or loss:

      

Foreign currency translation effect

       14,437       33,810  

Gain (loss) on cash flow hedge in joint ventures and subsidiary

       171,295       (27,092

Changes in fair value of available for sale securities

       129       (2,993

Taxes

       —         877  
    

 

 

   

 

 

 
       185,861       4,602  

Total other comprehensive income, net of tax

       194,861       4,602  
    

 

 

   

 

 

 

Comprehensive income - Continued operation

       136,586       183,682  
    

 

 

   

 

 

 

Comprehensive income - Discontinued operation

       —         414  
    

 

 

   

 

 

 

Total comprehensive income

       136,586       184,096  
    

 

 

   

 

 

 

Total net income (loss) attributable to:

      

Owners of the Parent

       21,115       130,261  

Non-controlling interests

       (79,390     48,819  
    

 

 

   

 

 

 
       (58,275     179,080  

Total comprehensive income attributable to:

      

Owners of the Company

       146,764       133,583  

Non-controlling interests

       (10,178     50,513  
    

 

 

   

 

 

 
       136,586       184,096  

Basic earnings per share from:

    24       

Continuing operations

     R$ 0.0798     R$ 0.4724  

Discontinuing operations

       —       R$ 0.0197  
    

 

 

   

 

 

 
     R$ 0.0798     R$ 0.4921  

Diluted earnings per share from:

    24       

Continuing operations

     R$ 0.0183     R$ 0.4123  

Discontinuing operations

       —       R$ 0.0197  
    

 

 

   

 

 

 
     R$ 0.0183     R$ 0.4320  

The accompanying notes are an integral part of these consolidated interim financial statements

 

16


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Cosan Limited

Consolidated statements of changes in equity

For the three month period ended March 31, 2017 and 2016

(In thousands of Brazilian Reais - R$)

 

     Share
capital
     Capital
reserve
    Accumulated other
comprehensive loss
    Retained
earnings
    Equity attributable to
owners of the
Company
    Non-controlling
interest
    Total equity  

At January 01, 2016 (Restated)

     5,328        4,006,562       (478,207     2,380,035       5,913,718       10,275,532       16,189,250  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net profit for the period (Restated)

     —          —         —         130,261       130,261       48,819       179,080  

Other comprehensive income:

               

Loss on cash flow hedge in joint ventures and subsidiary

     —          —         (16,935     —         (16,935     (10,157     (27,092

Foreign currency translation effects

     —          —         20,610       —         20,610       13,200       33,810  

Change in fair value of available for sale securities

     —          —         (353     —         (353     (1,349     (1,702
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

     —          —         3,322       130,261       133,583       50,513       184,096  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Contributions by and distributions to owners of the Company:

               

Exercise of stock options plan

     —          —         —         —         —         —         —    

Dividends - non-controlling interests

     —          (7,091     —         —         (7,091     7,091       —    

Dividends

     —          —         —         —         —         (579,079     (579,079

Share-based compensation - Subsidiaries

     —          1,553       —         —         1,553       1,396       2,949  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total contributions by and distributions to owners of the Company

     —          (5,538     —         —         (5,538     (570,592     (576,130
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At March 31, 2016 (Restated)

     5,328        4,001,024       (474,885     2,510,296       6,041,763       9,755,453       15,797,216  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated interim financial statements

 

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Table of Contents

Cosan Limited

Consolidated statements of changes in equity

For the three month period ended March 31, 2017 and 2016

(In thousands of Brazilian Reais - R$)

 

     Share
capital
     Capital
reserve
    Accumulated other
comprehensive loss
    Retained
earnings
    Equity attributable to
owners of the Company
    Non-controlling
interest
    Total equity  

At December 31, 2016

     5,328        4,051,591       (480,454     2,695,998       6,272,463       9,737,286       16,009,749  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net profit (loss) for the period

     —          —         —         21,115       21,115       (79,390     (58,275

Other comprehensive income:

               

Gain on cash flow hedge in joint ventures and subsidiary

     —          —         106,515       —         106,515       64,780       171,295  

Foreign currency translation effects

     —          —         13,455       —         13,455       982       14,437  

Financial instruments - common transactions

     —          —         5,598       —         5,598       3,402       9,000  

Change in fair value of available for sale securities

     —          —         81       —         81       48       129  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

     —          —         125,649       21,115       146,764       (10,178     136,586  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Contributions by and distributions to owners of the Company:

               

Dividends - non-controlling interests

     —          (7,442     —         —         (7,442     7,442       —    

Share options exercised - Subsidiaries

     —          10,201       —         —         10,201       5,921       16,122  

Dividends

     —          —         —         —         —         (138,665     (138,665

Share-based compensation - Subsidiaries

     —          1,250       —         —         1,250       1,595       2,845  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total contributions by and distributions to owners of the Company

     —          4,009       —         —         4,009       (123,707     (119,698
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners of the Company

               

Change of shareholding interest in subsidiary

     —          (154,368     —         —         (154,368     (120,223     (274,591
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At March 31, 2017

     5,328        3,901,232       (354,805     2,717,113       6,268,868       9,483,178       15,752,046  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated interim financial statements

 

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Cosan Limited

Consolidated statements of cash flows

For the three month period ended March 31, 2017 and 2016

(In thousands of Brazilian Reais - R$)

 

     Note      March 31, 2017     March 31, 2016
(Restated)
 

Cash flows from operating activities

       

(Loss) profit before taxes

        (14,446     179,549  

Adjustments for:

       

Depreciation and amortization

        446,556       352,424  

Lease and concession

        49,474       48,753  

Equity in earnings of associates

     12        (2,954     1,558  

Equity in earnings of joint ventures

     13        (255,697     (441,344

Losses on disposals of assets

        (2,441     4,841  

Option shares expense

        2,845       2,949  

Provision for legal proceedings

        18,355       21,197  

Indexation charges, interest and exchange, net

        673,233       863,717  

Other

        30,335       5,222  
     

 

 

   

 

 

 
        945,260       1,038,866  

Changes in:

       

Trade receivables

        167,725       (807

Inventories

        30,908       (6,276

Recoverable taxes

        (20,594     41,611  

Related parties

        14,110       17,186  

Trade payables

        (136,509     (27,418

Other financial liabilities

        9,816       (104,451

Employee benefits

        (105,172     (72,534

Provision for legal proceedings

        (17,622     (16,465

Judicial deposits

        (8,205     (1,566

Post-employment benefits

        (6,827     (6,284

Income tax and other tax

        (20,447     (74,287

Discontinued operation

        —         (100

Concessions payable

        (28,096     (25,996

Other assets and liabilities, net

        145,694       (98,010
     

 

 

   

 

 

 
        24,781       (375,397
     

 

 

   

 

 

 

Net cash generated by operating activities

        970,041       663,469  
     

 

 

   

 

 

 

Cash flows from investing activities

       

Capital contribution in associates

        —         (2,170

Marketable securities

        399,932       213,463  

Restricted cash

        (24,145     78,283  

Dividends received from associates

        2,464       1,743  

Dividends received from joint ventures

        279,875       249,653  

Discontinued operation

        —         (100

Put option exercised paid

        (275,780     —    

Acquisition of property, plant and equipment, intangible assets and investments

        (542,647     (389,200

Cash received on sale of fixed assets, and intangible assets

        7,000       —    
     

 

 

   

 

 

 

Net cash (used in) generated by investing activities

        (153,301     151,672  
     

 

 

   

 

 

 

 

19


Table of Contents

Cosan Limited

Consolidated statements of cash flows

For the three month period ended March 31, 2017 and 2016

(In thousands of Brazilian Reais - R$)

 

Cash flows from financing activities

      

Loans and borrowings and debentures raised

       2,485,716       628,261  

Payment of principal on loans, borrowings and debentures

       (439,216     (527,214

Payment of interest on loans, borrowings and debentures

       (313,265     (330,694

Payment of principal on financing leases

       (111,071     (111,206

Payment of interest on financing leases

       (80,504     (91,171

Real estate credit certificates

       (31,705     (31,176

Derivative financial instruments

       (167,143     (8,131

Dividends paid

       (161,522     (583,129

Share options exercised - Subsidiaries

       15,986       —    
    

 

 

   

 

 

 

Net cash generated by (used in) financing activities

       1,197,276       (1,054,460
    

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

       2,014,016       (239,319
    

 

 

   

 

 

 

Cash and cash equivalents at beginning of the period

       4,499,588       3,505,824  
    

 

 

   

 

 

 

Effect of exchange rate fluctuations on cash held

       30,486       (56,853
    

 

 

   

 

 

 

Cash and cash equivalents at end of the period

       6,544,090       3,209,652  
    

 

 

   

 

 

 

Supplemental cash flow information

      

Income taxes paid

       862       31,085  

The accompanying notes are an integral part of these consolidated interim financial statements

 

20


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Cosan Limited

Notes to the consolidated financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

1 Operations

Cosan Limited (“Cosan”) was incorporated in Bermuda on April 30, 2007. Cosan’s class A common shares are traded on the New York Stock Exchange (NYSE) (ticker - CZZ). The BDRs (Brazilian Depositary Receipts) representing Cosan’s class A common shares are listed on the Brazilian Stock Exchange (BM&FBovespa) (ticker - CZLT33). Mr. Rubens Ometto Silveira Mello is the ultimate controlling shareholder of Cosan. Cosan controls its subsidiaries Cosan S.A. Indústria e Comércio (“Cosan S.A.”) and Cosan Logística S.A. (“Cosan Logística”) through a 62.20% and 72.39% interest, respectively. Cosan, Cosan S.A., Cosan Logística and its subsidiaries are collectively referred to as the “Company”.

The Company’s primary activities are in the following business segments: (i) Piped natural gas distribution to part of the State of São Paulo through its subsidiary Companhia de Gás de São Paulo – COMGÁS (“COMGÁS”); (ii) Logistics services including transportation, port loading and storage of sugar, leasing or lending of locomotives, wagons and other railway equipment, through its indirect subsidiaries Rumo S.A. (“Rumo”), logistic segment (“Logistic”); (iii) Production and distribution of lubricants, through its indirect subsidiaries Cosan Lubrificantes e Especialidades S.A. (“Moove”) and Comma Oil & Chemicals Ltd. (“Comma”), under the Mobil licensed trademark in Brazil, Bolivia, Uruguay and Paraguay, in addition to the European and Asian market using the Comma brand and corporate activities (“Lubricants”); and (iv) other investments, in addition to the corporate structures of the Company (“Cosan’s other business”).

The Company also holds interests in two joint ventures (“JVs”): (i) Raízen Combustíveis S.A. (“Raízen Combustíveis”), a fuel distribution business, and (ii) Raízen Energia S.A. (“Raízen Energia”), which operates in the production and marketing of sugar, ethanol and energy cogeneration, produced from sugar cane bagasse.

On March 31, 2017, Cosan Logística had a consolidated working capital of R$607,252 and loss for the period of R$248,826. Nevertheless, it presented a net cash generation from operations of R$546,170 and made investments in the modernization of its fleet and improving the railway network in the amount of R$471,883, in line with its business plan. The capital increase associated with the debt rescheduling implemented in 2016, as well as the issuance of Senior Notes 2024 in 2017 (note 16), equated the Company’s operational continuity risk over a short-term horizon.

On February 23, 2017, TPG VI Fundo de Investimento em Participações (“TPG”), a shareholder of Rumo S.A (“Rumo”), exercised its right to exchange 11,479,987 shares issued by Rumo for shares issued by Cosan S.A in pursuant to the shareholders agreement entered into in 2010, subsequently added, between Cosan Logística, TPG VI, GIF, Cosan S.A and the Company. Cosan S.A and GIF agreed to settle financially the stock replacement obligation through of payment of R$ 275,780 and the shares received were valued at fair value in the amount of R$ 97,924 and recorded as capital reserve.

 

21


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Cosan Limited

Notes to the consolidated financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

2 Basis of preparation

2.1 Statement of compliance

The consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB). They do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company’s financial position and performance since the last annual consolidated financial statements as at and for the year ended December 31, 2016.

The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2016, except for the adoption of new standards and interpretations effective as of January 1, 2017. The Company has not early adopted any other standard, interpretation or amendment that has been issued.

All own relevant information of the interim financial statements, and only they, are being highlighted, and these correspond to those used by management in its management.

These consolidated interim financial statements were authorized for issue by the Board of Directors on May 05, 2017.

 

22


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Cosan Limited

Notes to the consolidated financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

3 Significant accounting policies

The accounting policies set out below have been applied consistently by the Company to all periods presented in this consolidated interim financial statements.

3.1 Basis of consolidation

The consolidated statements include the accounts of Cosan and its subsidiaries. Cosan’s subsidiaries are listed below:

 

     March 31,     December 31,  
     2017     2016  

Directly owned subsidiaries

    

Cosan Logística S.A.

     72.39     72.42

Cosan S.A. Indústria e Comércio

     62.20     62.29

Interest of Cosan S.A. in its subsidiaries

    

Comma Oil Chemicals Limited

     100.00     100.00

Companhia de Gás de São Paulo – COMGÁS

     62.66     62.66

Cosan Biomassa S.A. (i)

     100.00     100.00

Cosan Cayman II Limited

     100.00     100.00

Cosan Global Limited

     100.00     100.00

Cosan Investimentos e Participações S.A.

     100.00     100.00

Cosan Lubes Investments Limited

     100.00     100.00

Cosan Lubrificantes e Especialidades S.A.

     100.00     100.00

Cosan Luxembourg S.A.

     100.00     100.00

Cosan Overseas Limited

     100.00     100.00

Cosan Paraguay S.A.

     100.00     100.00

Cosan US, Inc.

     100.00     100.00

Ilha Terminal Distribuição de Produto Químicos Ltda.

     100.00     100.00

Pasadena Empreendimentos e Participações S.A.

     100.00     100.00

Zip Lube S.A.

     100.00     100.00

 

23


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Cosan Limited

Notes to the consolidated financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

     March 31,     December 31,  
     2017     2016  

Interest of Logística S.A. in its subsidiaries

    

Rumo S.A.

     28,37     28,37

Logispot Armazéns Gerais S.A.

     14,47     14,47

Elevações Portuárias S.A.

     28,37     28,37

Rumo Luxembourg Sarl

     28,37     28,37

ALL Intermodal S.A.

     28,37     28,37

Rumo Malha Oeste S.A.

     28,37     28,37

Rumo Malha Paulista S.A.

     28,37     28,37

Rumo Malha Sul S.A.

     28,37     28,37

Rumo Malha Norte S.A.

     28,23     28,22

ALL Armazéns Gerais Ltda.

     28,37     28,37

Portofer Ltda.

     28,37     28,37

Boswells S.A.

     28,37     28,37

Brado Holding S.A.

     28,37     28,37

Brado Logística e Participações S.A.

     17,51     17,65

Brado Logística S.A.

     17,51     17,65

ALL Serviços Ltda.

     28,37     28,37

ALL Argentina S.A.

     25,81     25,81

ALL Mesopotâmica S.A.

     20,02     20,02

ALL Central S.A.

     20,87     20,87

Paranaguá S.A.

     28,34     28,32

ALL Rail Management Ltda.

     14,19     14,19

PGT S.A.

     28,37     28,37

 

(i) The Company recorded, in the line with the non-controlling shareholder’s obligations, the Put Option, according to the shareholder agreement, for the repurchase of shares of non-controlling shareholders.

 

24


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Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

4 New standards and interpretations not yet effective

A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2017 and earlier application is permitted; however, the Group has not early adopted the following new or amended standards in preparing these consolidated interim financial statements.

IFRS 15 - Revenue from contracts with customers

The significant impacts related to IFRS 15 may be in the disclosures of the notes to the financial statements and in the policies applied to the control of revenues. Material impacts on revenue recognition are not expected

IFRS 9 - Financial instruments

The application of the new standard may result in a review of the provision for doubtful accounts. The study on possible impacts has not yet been completed.

IFRS 16 Leases

The Company began an initial assessment of the potential impact on its financial statements. So far, the most significant impact identified is that the subsidiary Rumo S.A will recognize new assets and liabilities for its operating leases related to concession. In the jointly-owned subsidiary Raízen, it is expected to have significant impacts on land leases.

The Company has not yet quantified the impact of adopting IFRS 16 on its assets and liabilities. The quantitative effect of the adoption of IFRS 16 will depend specifically on the transition method chosen, the use of practical files and recognition exemptions, and any additional leases that the Company will enter into. The Company expects to disclose its transition approach and quantitative information prior to adoption.

There are no other IFRS standards or IFRIC interpretations that have not come into effect and are expected to have a material impact on the Company.

5 Changes adopted

The changes below were applied for the first time in 2016 did not result in a significant impact on the Company’s annual consolidated financial statements or in the interim financial statements.

The nature and the impact of each new standard or amendment are described below:

(i) Discontinued operation

Due to the partial sale of RADAR segment’s shares and as required by IFRS 5 - Non-current assets available for sale and discontinued operations - the Company is restating the presentation of its income statement for the period ended March 31, 2016.

 

25


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Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

(ii) Correction of immaterial errors – Tax installments

During the year of 2016, the Company identified an error in the accounting record of tax installment liabilities, related to others federal taxes than income tax, referring to prior years.

Management concluded that the effect of the correction of error had no material impact on the Company’s interim financial statements for the period ended of March 31, 2016.

The impacts of both restatements for the period ended March 31, 2016 are as follows:

 

     March 31, 2016 (Restated)  
     As issued      Discontinued
operation (i)
     Tax
installment (ii)
     Restated  

Net sales

     3,141,982        (22,913      —          3,119,069  

Cost of sales

     (2,066,104      —          —          (2,066,104
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross profit

     1,075,878        (22,913      —          1,052,965  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating expense

     (509,936      7,788        —          (502,148
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before equity in earnings of investees and financial results

     565,942        (15,125      —          550,817  
  

 

 

    

 

 

    

 

 

    

 

 

 

Equity in earnings of associates

     (1,558      —          —          (1,558

Equity in earnings of joint ventures

     441,344        —          —          441,344  
           
     439,786        —          —          439,786  

Financial results

     (804,753      (3,763      (2,538      (811,054
  

 

 

    

 

 

    

 

 

    

 

 

 

Profit before taxes

     200,975        (18,888      (2,538      179,549  
  

 

 

    

 

 

    

 

 

    

 

 

 

Income tax expense

     (20,220      3,936        863        (15,421
  

 

 

    

 

 

    

 

 

    

 

 

 

Profit from continuing operations

     180,755        (14,952      (1,675      164,128  
  

 

 

    

 

 

    

 

 

    

 

 

 

Profit from discontinued operations, net of tax

     —          14,952        —          14,952  
  

 

 

    

 

 

    

 

 

    

 

 

 

Profit for the period

     180,755        —          (1,675      179,080  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income attributable to:

           

Owners of the Parent

     131,308        —          (1,047      130,261  

Non-controlling interests

     49,447        —          (628      48,819  

 

26


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Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

6 Operating segments

Segment information

The following segment information is used by Cosan’s senior management (the “Chief Operating Decision Maker”) to assess the performance of the operating segments and to make decisions with regard to the allocation of resources.

The following statement of financial position and profit or loss selected information by segment was prepared on a basis consistent with the accounting practices used in the preparation of consolidated information:

 

27


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Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

    March 31, 2017              
    Reported segments     Reconciliation     Additional information  
    Raízen
Energia
    Raízen
Combustíveis
    COMGÁS     Moove     Logistics     Cosan
Corporate
    Deconsolidated
effects IFRS 11
    Segment
eliminations /
adjustments
    Total
consolidated
    Cosan
Energia
    Cosan
Logística
 

Statement of income or loss:

                     

Net sales

    2,913,237       17,698,154       1,146,266       446,697       1,199,174       179       (20,611,391     (6,584     2,785,732       1,593,142       1,199,174  

Domestic market

    1,616,999       17,698,154       1,146,266       432,171       1,115,593       179       (19,315,153     (6,584     2,687,625       1,578,616       1,115,593  

External market

    1,296,238       —         —         14,526       83,581       —         (1,296,238     —         98,107       14,526       83,581  

Cost of sales

    (2,232,144     (16,746,925     (720,119     (313,987     (930,852     (1,067     18,979,069       6,584       (1,959,441     (1,035,174     (930,852

Gross profit

    681,093       951,229       426,147       132,710       268,322       (888     (1,632,322     —         826,291       557,968       268,322  

Selling expenses

    (144,302     (314,101     (167,787     (87,389     (2,355     (51     458,403       —         (257,582     (255,228     (2,355

General and administrative expenses

    (158,760     (116,242     (77,113     (20,219     (63,308     (46,734     275,002       —         (207,374     (136,917     (63,308

Other income (expense), net

    (85,294     (45,777     (581     148       (2,194     (13,413     131,071       —         (16,040     (13,846     (2,194

Financial results

    135,062       (172,116     (41,424     (19,799     (451,212     (105,957     37,054       —         (618,392     (135,038     (451,212

Financial expense

    (220,245     (50,271     (215,023     (7,288     (488,386     (187,535     270,516       —         (898,232     (423,559     (488,386

Financial income

    173,965       44,600       173,777       3,923       43,645       61,664       (218,565     —         283,009       266,726       43,645  

Foreign exchange losses, net

    (25,387     109,220       28,714       3,921       494       85,759       (83,833     —         118,888       136,888       494  

Derivatives

    206,729       (275,665     (28,892     (20,355     (6,965     (65,845     68,936       —         (122,057     (115,093     (6,965

Equity in earnings of associates

    (37,277     —         —         (1,579     1,746       132,735       37,277       (129,948     2,954       1,208       1,746  

Equity in earnings of joint ventures

    —         —         —         —         —         255,697       —         —         255,697       255,697       —    

Income tax expense benefit

    (77,576     (89,400     (55,714     (2,738     175       14,448       166,976       —         (43,829     (37,341     175  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

    312,946       213,593       83,528       1,134       (248,826     235,837       (526,539     (129,948     (58,275     236,503       (248,826

Total net income attributable to:

                     

Owners of the Company

    312,946       199,895       52,343       1,134       (70,922     226,427       (512,841     (187,867     21,115       205,315       (70,922

Non-controlling interests

    —         13,698       31,185       —         (177,904     9,410       (13,698     57,919       (79,390     31,188       (177,904
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    312,946       213,593       83,528       1,134       (248,826     235,837       (526,539     (129,948     (58,275     236,503       (248,826

Other selected data:

                     

Depreciation and amortization

    448,732       150,170       132,748       19,652       290,027       4,190       (598,902     —         446,617       156,590       290,027  

EBITDA

    704,192       625,279       313,414       43,323       492,238       331,536       (1,329,471     (129,948     1,050,563       565,472       492,238  

Additions to PP&E, intangible and biological assets

    889,745       258,825       68,720       1,736       471,883       308       (1,148,570     —         542,647       70,764       471,883  

Reconciliation of EBITDA:

                     

Profit (loss) for the period

    312,946       213,593       83,528       1,134       (248,826     235,837       (526,539     (129,948     (58,275     236,503       (248,826

Income tax and social contribution

    77,576       89,400       55,714       2,738       (175     (14,448     (166,976     —         43,829       37,341       (175

Financial result, net

    (135,062     172,116       41,424       19,799       451,212       105,957       (37,054     —         618,392       135,038       451,212  

Depreciation and amortization

    448,732       150,170       132,748       19,652       290,027       4,190       (598,902     —         446,617       156,590       290,027  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

    704,192       625,279       313,414       43,323       492,238       331,536       (1,329,471     (129,948     1,050,563       565,472       492,238  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

28


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

    March 31, 2016 (Restated)              
    Reported segments     Reconciliation     Additional information  
    Raízen
Energia
    Raízen
Combustíveis
    COMGÁS     Radar     Moove     Logistics     Cosan
Corporate
    Deconsolidated
effects IFRS 11
    Segment
eliminations /
adjustments
    Total
consolidated
    Cosan
Energia
    Cosan
Logística
 

Statement of income or loss:

                       

Net sales

    3,866,279       16,391,752       1,460,076       —         479,124       1,185,891       34       (20,258,031     (6,056     3,119,069       1,962,148       1,185,891  

Domestic market

    1,679,105       16,391,752       1,460,076       —         365,932       1,145,496       34       (18,070,857     (6,056     2,965,482       1,848,956       1,145,496  

External market

    2,187,174       —         —         —         113,192       40,395       —         (2,187,174     —         153,587       113,192       40,395  

Cost of sales

    (2,667,086     (15,600,588     (828,583     —         (371,944     (871,083     (550     18,267,674       6,056       (2,066,104     (1,201,078     (871,083

Gross profit

    1,199,193       791,164       631,493       —         107,180       314,808       (516     (1,990,357     —         1,052,965       761,070       314,808  

Selling expenses

    (188,404     (357,096     (154,584     —         (83,974     1,728       —         545,500       —         (236,830     (238,557     —    

General and administrative expenses

    (163,286     (101,209     (73,327     —         (18,793     (89,774     (46,070     264,495       —         (227,964     (141,656     (88,046

Other income (expense), net

    68,479       80,718       (2,016     —         1,701       2,272       (39,311     (149,197     —         (37,354     (39,836     2,272  

Financial results

    209,241       (132,961     (96,075     —         (18,913     (427,296     (373,550     (76,280     104,780       (811,054     (451,898     (427,296

Financial expense

    (262,775     (43,355     (209,988     —         (8,797     (469,652     (295,211     306,130       104,780       (878,868     (496,928     (469,652

Financial income

    162,288       59,551       113,554       —         964       61,526       70,508       (221,839     —         246,552       189,136       61,526  

Foreign exchange losses, net

    (15,174     358,297       123,854       —         17,421       46,520       337,609       (343,123     —         525,404       507,512       46,520  

Derivatives

    324,902       (507,454     (123,495     —         (28,501     (65,690     (486,456     182,552       —         (704,142     (651,618     (65,690

Equity in earnings of associates

    (36,283     2,520       —         —         (866     3,558       282,490       33,763       (286,740     (1,558     (5,116     3,558  

Equity in earnings of joint ventures

    —         —         —         —         —         —         441,344       —         —         441,344       441,344       —    

Income tax expense benefit

    (368,617     (109,974     (104,635     —         567       10,320       113,952       478,591       (35,625     (15,421     5,948       10,320  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) from continuing operations

    720,323       173,162       200,856       —         (13,098     (184,384     378,339       (893,485     (217,585     164,128       331,299       (184,384

Profit from discontinued operation, net of tax

    —         —         —         14,952       —         —         —         —         —         14,952       —         —    

Total net income attributable to:

                       

Owners of the Company

    720,323       163,097       200,856       14,952       (13,098     (48,044     378,339       (883,420     (402,744     130,261       247,031       (48,044

Non-controlling interests

    —         10,065       —         —         —         (136,340     —         (10,065     185,159       48,819       84,268       (136,340
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    720,323       173,162       200,856       14,952       (13,098     (184,384     378,339       (893,485     (217,585     179,080       331,299       (184,384

Other selected data:

                       

Depreciation and amortization

    643,442       163,619       119,047       —         20,629       209,786       2,963       (807,061     —         352,425       142,794       209,786  

EBITDA

    1,523,141       579,716       520,613       —         25,877       442,378       640,900       (2,102,857     (286,740     1,343,028       920,043       442,378  

Additions to PP&E, intangible and biological assets

    810,634       179,164       94,139       —         9,348       284,874       838       (989,798     —         389,199       104,425       284,874  

Reconciliation of EBITDA:

                       

Profit (loss) for the period

    720,323       173,162       200,856       —         (13,098     (184,384     378,339       (893,485     (217,585     164,128       331,299       (184,384

Income tax and social contribution

    368,617       109,974       104,635       —         (567     (10,320     (113,952     (478,591     35,625       15,421       (5,948     (10,320

Financial result, net

    (209,241     132,961       96,075       —         18,913       427,296       373,550       76,280       (104,780     811,054       451,898       427,296  

Depreciation and amortization

    643,442       163,619       119,047       —         20,629       209,786       2,963       (807,061     —         352,425       142,794       209,786  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

    1,523,141       579,716       520,613       —         25,877       442,378       640,900       (2,102,857     (286,740     1,343,028       920,043       442,378  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

29


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

    March 31, 2017              
    Reported segments     Reconciliation     Additional information  

Statement of financial position:

  Raízen
Energia
    Raízen
Combustíveis
    COMGÁS     Moove     Logistics     Cosan
Corporate
    Deconsolidated
effects IFRS 11
    Segment
elimination
    Total
consolidated
    Cosan
Energia
    Cosan
Logística
 

Cash and cash equivalents

    3,437,612       517,789       1,826,489       79,788       2,591,724       2,046,089       (3,955,401     —         6,544,090       3,724,546       2,591,724  

Marketable securities

    —         —         185,904       2,607       541,752       192,580       —         —         922,843       381,091       541,752  

Trade receivables

    371,930       1,974,343       495,264       247,691       309,721       10       (2,346,273     —         1,052,686       742,966       309,721  

Derivative financial instruments

    582,380       55,102       391,839       —         3,098       440,727       (637,482     —         835,664       832,566       3,098  

Inventories

    647,663       1,695,313       112,954       236,013       248,385       2,495       (2,342,976     —         599,847       351,462       248,385  

Other financial assets

    737,089       —         —         —         —         88,431       (737,089     (88,431     —         196,308       —    

Other current assets

    1.471.489       1,262,040       123,145       124,205       364,767       287,466       (2.733.529     (93,302     806,281       466,106       364,767  

Other non-current assets

    3,672,657       998,368       300,252       (46,017     2,670,528       1,501,363       (4,671,026     (32,447     4,393,679       1,747,715       2,670,528  

Investments in associates

    244,429       —         —         17,253       41,742       11,053,775       (244,429     (10,830,315     282,455       240,712       41,742  

Investments in joint ventures

    —         —         —         —         —         8,738,568       —         —         8,738,568       8,738,569       —    

Biological assets

    1,276,321       —         —         —         —         —         (1,276,321     —         —         —         —    

Property, plant and equipment

    11,215,926       2,374,314       —         234,239       10,544,803       147,603       (13,590,240     —         10,926,645       381,842       10,544,803  

Intangible assets and goodwill

    3,234,196       4,562,169       8,487,651       756,308       7,746,230       6,511       (7,796,365     —         16,996,700       9,250,470       7,746,230  

Loans, borrowings and debentures

    (10,325,687     (1,007,144     (3,988,800     (418,685     (10,875,536     (5,157,769     11,332,831       —         (20,440,790     (8,861,594     (10,875,536

Derivative financial instruments

    (368,228     (462,442     —         (30,831     (19,268     (286,517     830,670       —         (336,616     (317,349     (19,268

Trade payables

    (954,161     (1,057,933     (1,214,705     (207,411     (500,519     (4,857     2,012,094       —         (1,927,492     (1,426,973     (500,519

Real estate credit certificates

    —         —         —         —         (171,247     —         —         —         (171,247     —         (171,247

Employee benefits payable

    (361,806     (106,432     (31,334     (16,009     (103,879     (10,513     468,238       —         (161,735     (57,856     (103,879

Preferred shareholders payable in subsidiaries

    —         —         —         —         —         (1,809,176     —         —         (1,809,176     (1,809,176     —    

Lease

    —         —         —         —         (1,255,274     —         —         —         (1,255,274     —         (1,255,274

Other current liabilities

    (797,065     (1,619,483     (92,589     (136,238     (720,336     (346,105     2,416,548       101,190       (1,194,078     (464,708     (720,336

Other non-current liabilities

    (1,318,720     (4,155,496     (1,649,182     (130,639     (5,982,946     (1,312,798     5,474,216       24,561       (9,051,004     (3,017,040     (5,982,946
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets (net of liabilities) allocated by segment

    12,766,025       5,030,508       4,946,888       712,274       5,433,745       15,577,883       (17,796,533     (10,918,744     15,752,046       11,099,655       5,433,745  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

    26,891,692       13,439,438       11,923,498       1,652,087       25,062,750       24,505,618       (40,331,130     (11,044,495     52,099,458       27,054,351       25,062,750  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    —         —         —         —         —         —         —         —         —         —         —    

Equity attributable to owners of the Company

    12,766,988       4,823,816       4,946,888       712,274       1,471,584       15,633,760       (17,590,804     (16,495,638     6,268,868       9,364,897       1,471,584  

Non-controlling interests

    (963     206,692       —         —         3,962,161       (55,877     (205,729     5,576,894       9,483,178       1,734,758       3,962,161  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

    12,766,025       5,030,508       4,946,888       712,274       5,433,745       15,577,883       (17,796,533     (10,918,744     15,752,046       11,099,655       5,433,745  

 

30


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

     December 31, 2016              
     Reported segments     Reconciliation     Additional information  
Statement of financial position:    Raízen
Energia
    Raízen
Combustíveis
    COMGÁS     Moove     Logistics     Cosan
Corporate
    Deconsolidated
effects IFRS 11
    Segment
elimination
    Total
consolidated
    Cosan
Energia
    Cosan
Logística
 

Cash and cash equivalents

     2,787,588       757,140       2,108,253       203,855       260,542       1,926,938       (3,544,728     —         4,499,588       3,990,930       260,542  

Marketable securities

     —         —         202,568       10,958       920,413       157,641       —         —         1,291,580       371,167       920,413  

Trade receivables

     682,813       2,518,713       513,423       240,059       431,461       487       (3,201,526     —         1,185,430       753,969       431,461  

Derivative financial instruments

     1,243,260       178,060       437,137       —         3,669       310,274       (1,421,320     —         751,080       747,411       3,669  

Inventories

     2,293,492       2,108,825       114,745       228,941       284,579       2,487       (4,402,317     —         630,752       346,173       284,579  

Other financial assets

     711,453       —         —         —         —         70,487       (711,453     (70,487     —         70,487       —    

Other current assets

     3,030,674       1,456,418       80,758       141,972       382,551       658,550       (4,487,092     (107,927     1,155,904       793,861       382,551  

Other non-current assets

     2,852,423       1,089,809       307,306       26,036       2,549,631       1,436,632       (3,942,232     (33,225     4,286,380       1,761,857       2,549,631  

Investments in associates

     393,159       —         —         19,400       46,847       11,153,390       (393,159     (10,932,690     286,947       240,100       46,847  

Investments in joint ventures

     —         —         —         —         —         8,506,395       —         —         8,506,395       8,506,395       —    

Biological assets

     1,119,623       —         —         —         —         —         (1,119,623     —         —         —         —    

Property, plant and equipment

     10,525,166       2,379,438       —         238,346       10,337,119       150,983       (12,904,604     —         10,726,448       389,329       10,337,119  

Intangible assets and goodwill

     3,224,303       4,532,282       8,550,984       770,118       7,781,289       7,048       (7,756,585     —         17,109,439       9,328,150       7,781,289  

Loans, borrowings and debentures

     (11,556,950     (1,043,995     (4,070,076     (471,661     (8,523,175     (5,273,585     12,600,945       —         (18,338,497     (9,138,129     (8,523,175

Derivative financial instruments

     (789,193     (648,070     —         (35,155     (12,303     (248,386     1,437,263       —         (295,844     (283,541     (12,303

Trade payables

     (1,147,089     (1,148,013     (1,226,634     (232,690     (565,539     (8,247     2,295,102       —         (2,033,110     (1,467,570     (565,539

Real estate credit certificates

     —         —         —         —         (195,745     —         —         —         (195,745     —         (195,745

Employee benefits payable

     (314,989     (92,573     (63,904     (30,187     (117,149     (26,919     407,562       —         (238,159     (121,009     (117,149

Preferred shareholders payable in subsidiaries

     —         —         —         —         —         (1,769,427     —         —         (1,769,427     (1,769,427     —    

Lease

     —         —         —         —         (1,397,543     —         —         —         (1,397,543     —         (1,397,543

Other current liabilities

     (1,507,193     (2,245,227     (211,900     (168,995     (663,083     (407,835     3,752,420       116,036       (1,335,777     (662,235     (663,083

Other non-current liabilities

     (1,367,686     (4,714,035     (1,549,441     (132,414     (5,881,195     (1,408,841     6,081,721       115,892       (8,855,999     (3,065,579     (5,881,195
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets (net of liabilities) allocated by segment

     12,180,854       5,128,772       5,193,219       808,583       5,682,276       15,238,072       (17,309,626     (10,912,401     16,009,749       10,792,339       5,682,276  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

     28,863,954       15,020,685       12,315,174       1,879,685       23,038,008       24,381,312       (43,884,639     (11,144,329     50,469,850       27,299,829       23,038,008  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity attributable to owners of the

     12,181,817       4,920,333       5,193,219       808,583       1,540,225       15,238,072       (17,102,150     (16,507,636     6,272,463       8,965,606       1,540,225  

Company

                      

Non-controlling interests

     (963     208,439       —         —         4,142,051       —         (207,476     5,595,235       9,737,286       1,826,733       4,142,051  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     12,180,854       5,128,772       5,193,219       808,583       5,682,276       15,238,072       (17,309,626     (10,912,401     16,009,749       10,792,339       5,682,276  

 

31


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

Net sales by segment:

 

     March 31, 2017      March 31, 2016
(Restated)
 

Reported segment

     

Raízen Energia

     

Ethanol

     1,530,562        1,936,912  

Sugar

     1,291,726        1,846,288  

Cogeneration

     41,098        43,881  

Other

     49,851        39,198  
  

 

 

    

 

 

 
     2,913,237        3,866,279  

Raízen Combustíveis

     

Fuels

     17,698,154        16,391,752  
  

 

 

    

 

 

 
     17,698,154        16,391,752  

COMGÁS

     

Industrial

     760,263        1,006,065  

Residential

     151,485        155,406  

Thermal generation

     —          51,721  

Cogeneration

     47,723        54,523  

Automotive

     51,256        47,150  

Commercial

     67,679        53,327  

Construction revenue

     56,327        66,192  

Other

     11,533        25,692  
  

 

 

    

 

 

 
     1,146,266        1,460,076  

Lubricants

     

Finished goods

     381,223        425,912  

Basic oil

     57,521        48,942  

Other

     7,953        4,270  
  

 

 

    

 

 

 
     446,697        479,124  

Logistics

     

North operations

     914,200        895,886  

South operations

     237,100        224,871  

Container operations

     47,874        65,134  
  

 

 

    

 

 

 
     1,199,174        1,185,891  

Reconciliation

     

Cosan Corporate

     

Other

     179        34  
  

 

 

    

 

 

 
     179        34  

IFRS 11 - Deconsolidated of adjustments/eliminations joint ventures and eliminations

     (20,617,975      (20,264,087
  

 

 

    

 

 

 

Total

     2,785,732        3,119,069  
  

 

 

    

 

 

 

 

32


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

7 Cash and cash equivalents

 

     March 31, 2017      December 31, 2016  

Cash and bank deposits

     2,439,687        376,029  

Savings account

     541,585        409,333  

Financial investments

     3,562,818        3,714,226  
  

 

 

    

 

 

 
     6,544,090        4,499,588  
  

 

 

    

 

 

 

Financial investments are composed as follows:

     
     March 31, 2017      December 31, 2016  

Investment fund

     

Repurchase agreements

     2,667,025        2,840,760  

Bank certificate of deposits - CDB

     355,707        363,147  
  

 

 

    

 

 

 
     3,022,732        3,203,907  

Bank investments

     

Repurchase agreements

     29,832        26,719  

Bank certificate of deposits - CDB

     505,234        468,384  

Other

     5,020        15,216  
  

 

 

    

 

 

 
     540,086        510,319  
  

 

 

    

 

 

 
     3,562,818        3,714,226  
  

 

 

    

 

 

 

8 Marketable securities

 

     March 31, 2017      December 31, 2016  

Government security (i)

     922,843        1,004,388  

Bank certificate of deposits - CDB (ii)

     —          287,192  
  

 

 

    

 

 

 
     922,843        1,291,580  
  

 

 

    

 

 

 

 

(i) Sovereign debt securities classified as held-for-trading have stated interest connected to SELIC and mature in two to five years.
(ii) Bank certificate of deposits classified as held-for-trading have stated interest rates connected to CDI and mature in two to five years.

 

33


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Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

9 Trade receivables

 

     March 31, 2017      December 31, 2016  

Domestic – Brazilian Reais

     1,102,844        1,248,270  

Export – Foreign currency

     46,371        27,446  

Allowance for doubtful accounts

     (96,529      (90,286
  

 

 

    

 

 

 
     1,052,686        1,185,430  

Current

     999,500        1,130,624  
  

 

 

    

 

 

 

Non-current

     53,186        54,806  
  

 

 

    

 

 

 

10 Other current tax receivables

 

     March 31, 2017      December 31, 2016  

ICMS - State VAT

     611,854        608,334  

Credit installment

     37,434        36,708  

PIS/COFINS - Revenue tax

     285,019        257,920  

Other

     18,351        15,743  
  

 

 

    

 

 

 
     952,658        918,705  

Current

     211,585        178,856  
  

 

 

    

 

 

 

Non-Current

     741,073        739,849  
  

 

 

    

 

 

 

11 Related parties

a) Receivables from and payables to related parties:

 

     March 31, 2017      December 31, 2016  

Current Asset

     

Commercial operation

     

Raízen Energia S.A.

     37,986        37,249  

Aguassanta Participações S.A.

     198        6,342  

Radar Propriedades Agricolas S.A.

     514        517  

Raízen Combustíveis S.A.

     16,571        4,206  

Other

     914        531  
  

 

 

    

 

 

 
     56,183        48,845  

Corporate operation / Agreements

     

Raízen Energia S.A.

     —          9,672  
  

 

 

    

 

 

 
     56,183        58,517  
  

 

 

    

 

 

 

Non-current assets

     

Receivables under the framework agreement

     

Janus Brasil Participações S.A

     28,705        28,705  

Raízen Energia S.A.

     85,081        114,473  
  

 

 

    

 

 

 
     113,786        143,178  

Financial and corporation operations

     

Rezende Barbosa

     35,944        38,944  

Other

     1,766        1,618  
  

 

 

    

 

 

 
     37,710        40,562  
  

 

 

    

 

 

 
     151,496        183,740  
  

 

 

    

 

 

 

 

34


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

 

     March 31, 2017      December 31, 2016  

Current liabilities

     

Corporate operations

     

Raízen Energia S.A.

     141,880        160,030  

Raízen Combustíveis S.A.

     111,078        75,624  

Other

     3,050        1,427  
  

 

 

    

 

 

 
     256,008        237,081  

b) Related party transactions:

 

     March 31, 2017      March 31, 2016
(Restated)
 

Sales of goods and services

     

Raízen Combustíveis S.A

     35,817        27,898  

Raízen Energia S.A.

     77,739        115,257  
  

 

 

    

 

 

 
     113,556        143,155  

Purchase of goods / Inputs

     

Raízen Energia S.A.

     (14      (19

Raízen Combustíveis S.A.

     (203,851      (201,220
  

 

 

    

 

 

 
     (203,865      (201,239

Discontinued operation

     

Raízen Energia S.A.

     —          16,171  
  

 

 

    

 

 

 
     —          16,171  

Shared income (expense)

     

Aguassanta Participações S.A.

     160        79  

Raízen Energia S.A.

     (17,295      (19,008
  

 

 

    

 

 

 
     (17,135      (18,929

Financial result

     

Raízen Energia S.A.

     284        361  

Other

     (204      (201
  

 

 

    

 

 

 
     80        160  

c) Officers’ and directors’ compensation

 

     March 31, 2017      March 31, 2016
(Restated)
 

Short-term benefits to employees and managers

     25,558        19,138  

Post-employment benefits

     265        169  

Other long-term benefits

     130        59  

Stock option expense

     2,845        2,949  
  

 

 

    

 

 

 
     28,798        22,315  
  

 

 

    

 

 

 

 

35


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

12 Investments in associates

a) Information in associates of the Company and the Company´s ownership:

 

     Tellus Brasil
Participações
S.A.
    Novvi Limited
Liability
Company
    Janus Brasil
Participações
S.A.
    Radar
Propriedades
Agricolas S.A
    Radar II
Propriedades
Agricolas S.A
    Other
investments
    Total  

Shares issued by the associate

     65,957,282       200,002       1,907,000       1,735,703       81,440,221       —      

Shares held by Cosan

     33,638,214       100,001       934,430       531,125       24,920,708       —      

Cosan ownership interest

     51     33.33     51     51     51     —      
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

December 31, 2016

     97,002       18,838       33,998       55,148       30,537       51,424       286,947  

Equity in earnings (losses) of associates

     961       (1,579     1,006       414       279       1,873       2,954  

Other comprehensive income

     —         (4,493     90       33       7       —         (4,363

Dividends

     —         —         —         —         —         (4,000     (4,000

Other

     —         —         —         —         (25     942       917  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

March 31, 2017

     97,963       12,766       35,094       55,595       30,798       50,239       282,455  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings (losses) of associates March 31, 2016

     (1,989     (866     867       —         —         430       (1,558

 

36


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

b) Information in the non-controlling interests in subsidiaries of the Company:

 

     Cosan S.A.
Indústria e
Comércio
    Cosan
Logística

S.A.
    Companhia de
Gás de

São Paulo -
COMGÁS
    Rumo S.A.     Logispot
Armazéns
Agrícolas
S.A.
    Other     Radar -
Discontinued
operation
     Total  

Shares issued by the associate

     407,214,353       366,490,593       127,313,301       1,339,015,898       2,040,816       —         —       

Shares held by non-controlling shareholders

     153,561,491       100,830,418       47,535,592       959,137,088       1,000,000       —         —       

Non-controlling interest

     37.71     27.51     37.34     71.63     49.00     —         —       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

December 31, 2016

     3,706,727       61,776       1,826,733       4,105,962       36,088       —         —          9,737,286  

Equity in earnings (losses) of associates

     80,601       (19,584     31,185       (177,688     (216     6,312       —          (79,390

Other comprehensive income (losses)

     68,820       39       —         417       —         —         —          69,276  

Dividends

     (1,487     —         (127,094     (3,247     —         (3,330     —          (135,158

Other

     (115,996     903       3,934       908       —         1,415       —          (108,836
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

March 31, 2017

     3,738,665       43,134       1,734,758       3,926,352       35,872       4,397       —          9,483,178  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Equity in (losses) earnings of associates March 31, 2016 (Restated)

     118,536       (17,645 )       77,665       (135,649 )       (690 )       —         6,602        48,819  

 

37


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

13 Investments in joint ventures

Changes to investments in joint ventures were as follows:

 

     Raízen
Combustíveis S.A.
    Raízen Energia
S.A.
    Total  

Shares issued by the associate

     3,303,168,484       5,902,595,634    

Shares held by Cosan

     1,651,584,242       2,951,297,817    

Cosan ownership interest

     50.00     50.00  
  

 

 

   

 

 

   

Equity in earnings of joint ventures March 31, 2016

     81,185       360,159       441,344  

December 31, 2016

     3,190,822       5,315,573       8,506,395  

Equity in earnings of joint ventures

     99,589       156,108       255,697  

Other comprehensive losses

     (4,002     175,220       171,218  

Interest on capital

     (17,000     —         (17,000

Dividends

     (139,000     (38,742     (177,742
  

 

 

   

 

 

   

 

 

 

March 31, 2017

     3,130,409       5,608,159       8,738,568  
  

 

 

   

 

 

   

 

 

 

The statement of financial position and statement of profit or loss of the joint ventures are disclosed in Note 6, Segments.

Pursuant to the terms of the Raízen Joint Venture - Framework Agreement, Cosan is responsible for certain legal proceedings that existed prior to the formation of Raízen, net of judicial deposits as of April 1, 2011, as well as tax installments under the REFIS (tax amnesty and refinancing program), recorded in “Other taxes payable”. Additionally, Cosan granted access to Raízen a credit line (stand-by facility) in the amount of US$500.000, which was unused at March 31, 2017.

 

38


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

14 Property, plant and equipment

 

     Land, buildings
and improvements
    Machinery,
equipment and
facilities
    Railcars and
locomotives
    Permanent
railways
    Construction in
progress
    Other     Total  

Cost

              

At December 31, 2016

     1,043,437       716,310       5,270,469       4,474,856       708,580       326,361       12,540,013  

Additions

     —         —         6,455       3,729       463,925       330       474,439  

Disposals

     (1,709     (1,926     —         —         —         (7,752     (11,387

Transfers

     1,185       4,429       269,162       44,036       (341,960     6,392       (16,756
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At March 31, 2017

     1,042,913       718,813       5,546,086       4,522,621       830,545       325,331       12,986,309  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation

              

At December 31, 2016

     (255,893     (287,745     (742,297     (542,228     —         14,598       (1,813,565

Additions

     (9,582     (18,131     (118,504     (95,799     —         (17,413     (259,429

Disposals

     166       471       —         —         —         3,355       3,992  

Transfers

     (894     (880     9,057       (12,612     —         14,667       9,338  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At March 31, 2017

     (266,203     (306,285     (851,744     (650,639     —         15,207       (2,059,664
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At December 31, 2016

     787,544       428,565       4,528,172       3,932,628       708,580       340,959       10,726,448  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At March 31, 2017

     776,710       412,528       4,694,342       3,871,982       830,545       340,538       10,926,645  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

39


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

15 Intangible assets and goodwill

 

     Goodwill      Concession
rights
    Improvements to
public concessions
and operating
licenses
    Trademarks     Customer
relationships
    Other     Total  

Cost:

               

At December 31, 2016

     715,259        16,912,506       435,624       252,474       946,824       376,669       19,639,356  

Additions

     —          58,368       —         —         10,862       6,809       76,039  

Disposals

     —          (11,313     —         —         (2,218     —         (13,531 )  

Transfers

     —          95       —         —         (8,008     12,234       4,321  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At March 31, 2017

     715,259        16,959,656       435,624       252,474       947,460       395,712       19,706,185  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amortization

               

At December 31, 2016

     —          (1,319,980     (200,876     (182,616     (668,695     (157,750     (2,529,917

Additions

     —          (110,143     (20,816     (5,707     (33,784     (16,752     (187,202 )  

Disposals

     —          6,292       —         —         1,936       —         8,228  

Transfers

     —          —         —         —         464       (1,058     (594 )  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At March 31, 2017

     —          (1,423,831     (221,692     (188,323     (700,079     (175,560     (2,709,485
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At December 31, 2016

     715,259        15,592,526       234,748       69,858       278,129       218,919       17,109,439  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At March 31, 2017

     715,259        15,535,825       213,932       64,151       247,381       220,152       16,996,700  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capitalization of borrowing costs

Capitalized borrowing costs for the period ended March 31, 2017, amounted to R$ 2,136 (R$ 5,182 for the period ended March 31, 2016). The weighted average interest rate used to capitalize borrowing costs on the balance of construction in progress, was 10.41% p.a. for the period ended March 31, 2017 (13.94% p.a. for the period ended March 31, 2016).

 

40


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

Intangible assets (excluding goodwill)

   Annual rate of
amortization - %
     March 31,
2017
     December 31,
2016
 

Gas distribution concession - COMGÁS(i)

     Concession term        8,196,165        8,240,521  

Concession rights - Rumo(ii)

     Concession term        7,339,660        7,352,005  
     

 

 

    

 

 

 
        15,535,825        15,592,526  

Operating license for port terminal(iii)

     4.00        213,931        234,748  

Trademarks

        

Mobil

     10.00        39,947        45,654  

Comma

     —          24,204        24,204  
     

 

 

    

 

 

 
        64,151        69,858  

Relationship with customers:

        

Comgás

     3.00        213,963        233,971  

Lubricants

     6.00        33,418        44,158  
     

 

 

    

 

 

 
        247,381        278,129  

Other

        

Software license

     20.00        140,610        146,210  

Other

        79,542        72,709  
        220,152        218,919  
     

 

 

    

 

 

 

Total

        16,281,440        16,394,180  
     

 

 

    

 

 

 

 

(i) Refers to the intangible asset for the public gas distribution service concession, which represents the right to charge users for the supply of gas, comprised of: (i) the concession rights recognized in the business combination and (ii) concession assets;
(ii) Refers to the concession right agreement of Rumo Malha Norte, which will be amortized until the end of the concession in 2079;
(iii) Port operating license and customer relationships of Rumo, from the business combinations.

Impairment testing of cash-generating units (“CGU”) goodwill

The Company tests the recoverable amounts of goodwill arising from business combination transactions annually. Property, plant and equipment and definite life intangible assets that are subject to depreciation and amortization are tested for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

During the period ended March 31, 2017, no impairment indicators were identified that would trigger the need for an impairment test.

 

41


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

16 Loans, borrowings and debentures

 

    

Interest

                     

Description

  

Index

   Annual
interest (i)
    March 31,
2017
     December
31, 2016
     Maturity  

Loan and borrowings

             

BNDES

   URTJLP      9.32     2,522,483        2,663,073        Jun-29  
   Fixed      5.11     1,257,582        1,233,476        Feb-25  
   TJ462      10.43     608,255        651,371        Oct-20  
   Selic      14.20     308,393        313,395        Jun-23  
   TJLP      9.78     115,427        137,130        Jun-23  
   Selic      13.65     4,985        5,277        Sep-20  
   Fixed      3.91     3,748        3,930        Jan-24  
   IPCA      12.13     3,557        3,453        Nov-21  
   URTJLP      11.40     —          17        Jan-17  

EIB

   US$ + Libor      2.51     568,816        612,961        Sep-21  

Foreign loans

   GBP + Libor      3.74     217,151        218,232        Dec-19  

NCE

   112% of CDI      13.68     124,230        120,069        Dec-18  
   129.62% CDI      16.00     574,571        552,576        Jun-23  
   129.62% CDI      16.05     295,102        294,516        Dec-18  
   129.62% CDI      16.02     81,453        80,486        Nov-17  

Perpetual Notes

   US$      8.25     1,604,168        1,650,089        —    

Resolution 4131

   US$      3.80     129,585        133,957        Oct-20  
   US$ + Libor      2.40     395,034        407,306        Mar-18  
   US$ + Libor      3.27     31,889        32,798        Apr-17  

Senior Notes Due 2018

   Fixed      9.50     164,215        168,163        Mar-18  

Senior Notes Due 2023

   US$      5.00     308,964        322,062        Mar-23  

Senior Notes Due 2027

   US$      7.00     2,213,084        2,304,384        Jan-27  

Senior Notes Due 2024

   US$      7.38     2,375,478        —          Feb-24  

FINEP

   Fixed      5.00     102,259        109,233        Nov-20  

Trade banks

   CDI + 4.91% p.a.      17.64     147,521        163,815        Jun-19  
   Fixed US$      6.33     91,079        86,140        Dec-21  

Working capital

   CDI + 2.80% p.a.      15.27     405,619        390,024        Dec-18  
   CDI + 2.95% p.a.      15.44     298,040        287,168        Dec-18  
   CDI + 0.28% p.m.      16.37     18,936        9,988        Jan-18  
   CDI + 0.33% p.m.      16.65     10,061        —          Mar-18  
   118% do CDI      —         22,920        22,605        Sep-17  

Prepayment

   US$+Libor Tri      4.03     10,334        55,641        Apr-17  

FINIMP

   US$+Libor Tri      3.52     39,139        40,798        Jun-17  
       

 

 

    

 

 

    
          15,054,078        13,074,133     

 

42


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

    

Interest

                     

Description

  

Index (i)

   Annual
interest (ii)
    March 31,
2017
     December
31, 2016
     Maturity  

Debentures

             

Non-convertible debentures

   CDI + 2,05% p.a.      14.43     153,669        154,235        Mar-18  
   CDI + 1,30% p.a.      13.59     290,000        300,183        Oct-17  
   CDI + 3,50% p.a.      16.05     2,443,137        2,347,271        Jun-23  
   IPCA      5.26     538,157        528,340        Dec-25  
   108 % of CDI      13.16     338,020        350,852        Jul-18  
   IPCA      6.57     1,325,765        1,291,413        Sep-20  
   Fixed      13.13     169,012        163,862        Oct-20  
   CDI      13.14     128,952        128,208        Jun-23  
       

 

 

    

 

 

    
          5,386,712        5,264,364     

Total

          20,440,790        18,338,497     
       

 

 

    

 

 

    

Current

          3,049,146        2,404,009     
       

 

 

    

 

 

    

Non-current

          17,391,644        15,934,488     
       

 

 

    

 

 

    

 

(i) As at March 31, 2017.

The Company used for calculating the average rates, on an annual basis, the annual average CDI of 9.15% and TJLP of 5%.

Senior Notes 2024

On February 9, 2017, the indirect subsidiary, “Rumo S.A”, issued a foreign debt, Senior Notes Due 2024 (“2024 Notes”) in the total amount of US $ 750,000 maturing on February 2024 with coupon of 7.375% p.a, paid semiannually.

The 2024 Notes were rated, BB- by Standard & Poor’s and Fitch Ratings. Rumo will use the net proceeds of this transaction to prepay certain debt.

The carrying amounts of loans, borrowings and debentures are denominated in the following currencies:

 

     March 31,
2017
     December 31,
2016
 

Reais (R$)

     12,456,070        12,474,129  

Dollar (USD) (i)

     7,767,569        5,646,136  

Pound (GBP)

     217,151        218,232  
  

 

 

    

 

 

 
     20,440,790        18,338,497  
  

 

 

    

 

 

 

 

(i) On March 31, 2017, all dated debts denominated in US Dollars have currency risk protection through derivatives (Note 27).

Financial Covenants

The Company and its subsidiaries are subject to certain restrictive clauses in most of the loan and financing agreements, based on certain financial and non-financial indicators.

As at March 31, 2017, the Company and its subsidiaries were in compliance with all debt financial covenants.

 

43


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

17 Leases

Finance lease liabilities

Finance lease liabilities are payable as follows:

 

     March 31, 2017     December 31,
2016
 
     Less than
one year
    Between
one and five
years
    More than
five years
    Total     Total  

Future minimum lease payments

     531,860       803,863       318,029       1,653,752       1,837,441  

Rolling stock

     502,321       716,449       221,957       1,440,727       1,616,719  

Terminal

     23,400       82,580       96,072       202,052       207,950  

Other

     6,139       4,834             10,973       12,772  

Interests

     (116,384     (214,484     (67,610     (398,478     (439,898

Rolling stock

     (100,748     (173,688     (46,586     (321,022     (358,158

Terminal

     (14,702     (40,087     (21,024     (75,813     (79,611

Other

     (934     (709           (1,643     (2,129
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Present value of minimum lease payments

     415,476       589,379       250,419       1,255,274       1,397,543  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Current

           415,476       472,632  
        

 

 

   

 

 

 

Non-current

           839,798       924,911  
        

 

 

   

 

 

 

Leases have various expiration dates, the last maturing in June 2043. The amounts are updated annually by Brazilian market price index ( Índice Geral de Preços do Mercado-IGPM ) plus TJLP (Long-Term Interest Rate) or CDI.

Operating leases

As of March 31, 2017, the future minimum lease payments under non-cancellable leases are as follows:

 

     March 31, 2017      December 31,  
     Total future minimum payments      2016  
     Less than one
year
     Between one and
five years
     More than five
years
     Total      Total  

Assets

     12,011        30,862        9,356        52,229        53,171  

The rentals are recognized as expenses (Note 25) on a straight-line basis over the life of the respective agreement.

 

44


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

18 Concessions payable

 

     Concessions payable      Judicial deposits  
     March 31,
2017
     December 31,
2016
     March 31,
2017
     December 31,
2016
 

Payables

           

Rumo Malha Sul

     72,250        73,707        —          —    

Rumo Malha Paulista

     52,186        52,979        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 
     124,436        126,686        —          —    

Court Discussion

           

Rumo Malha Paulista

     1,399,318        1,345,722        118,820        118,820  

Rumo Malha Oeste

     1,178,558        1,135,398        19,940        19,464  
  

 

 

    

 

 

    

 

 

    

 

 

 
     2,577,876        2,481,120        138,760        138,284  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2,702,312        2,607,806        138,760        138,284  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

     27,822        27,662        
  

 

 

    

 

 

       

Non-current

     2,674,490        2,580,144        
  

 

 

    

 

 

       

19 Trade payables

 

     March 31,
2017
     December 31,
2016
 

Natural gas suppliers

     1,410,272        1,377,528  

Materials and service suppliers

     685,402        789,675  

Fuels suppliers

     3,421        706  

Judicial deposits (i)

     (294,976      (294,976

Other

     123,373        160,177  
  

 

 

    

 

 

 
     1,927,492        2,033,110  
  

 

 

    

 

 

 

Current

     1,926,919        2,032,542  
  

 

 

    

 

 

 

Non-current

     573        568  
  

 

 

    

 

 

 

 

(i) There is a judicial discussion between the subsidiary COMGÁS and its gas supplier. The gas supplier is charging different prices comparing to the gas supply market. On March 31, 2017, the balance of judicial discussion is R$ 1,056,655 (R$ 1,045,311 on December 31, 2016). The amount is secured by judicial deposit R$ 294,976 (R$ 294,976 on December 31, 2016) and the guaranteed value through surety is of R$ 761,679 (R$ 750,335 on December 31, 2016).

 

45


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

20 Other taxes payable

 

     March 31, 2017      December 31, 2016  

Tax amnesty and refinancing program - Refis

     216,293        215,565  

ICMS - State VAT

     85,562        84,700  

COFINS - Revenue tax

     39,222        54,208  

PIS - Revenue tax

     8,225        11,337  

INSS - Social security

     5,538        7,033  

Other

     24,801        42,102  
  

 

 

    

 

 

 
     379,641        414,945  
  

 

 

    

 

 

 

Current

     223,348        261,169  
  

 

 

    

 

 

 

Non-Current

     156,293        153,776  
  

 

 

    

 

 

 

21 Income tax and social contribution

a) Reconciliation of income and social contribution tax expenses:

 

     March 31, 2017      March 31, 2016
(Restated)
 

(Loss) profit before taxes

     (14,446      179,549  

Income tax and social contribution at nominal rate (34%)

     4,912        (61,047

Adjustments to reconcile nominal to effective tax rate

     

Equity in earnings of investees (non-taxable income)

     87,941        149,527  

Credit claims for damages

     —          1,398  

Differences in tax rates on earnings / losses of overseas companies

     (37,169      (43,108

Differences in tax rates on entities under Brazilian presumed profits tax regime

     (97      (88

Stock options expenses

     (966      (1,002

Interest on capital (net received)

     (5,780      (5,610

Non-deductible expenses (donations, gifts, etc.)

     (6,092      (2,037

Tax losses not recorded (i)

     (88,682      (69,917

Other

     2,104        16,463  
  

 

 

    

 

 

 

Income tax and social contribution benefit (expense) - current and deferred

     (43,829      (15,421
  

 

 

    

 

 

 

Effective rate - %

     (303.40      8.59  
  

 

 

    

 

 

 

 

(i) Refers mainly to tax losses not recorded in subsidiaries of Rumo which under current conditions do not attend the requirements of future taxable profits that justify the recognition of the deferred tax assets. In accordance with Brazilian Federal Taxes rules those losses do not expire.

 

46


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

b) Deferred income tax assets and liabilities:

 

     March 31, 2017     December
31, 2016
 
     Basis     Income
taxes
(25%)
    Social
contribution
(9%)
    Total
income
taxes
(34%)
    Total
income
taxes
(34%)
 

Tax loss carry forwards

          

Income tax loss carry forwards

     7,271,369       1,817,842       —         1,817,842       1,900,366  

Social contribution tax loss carry forwards

     7,284,876       —         655,639       655,639       704,480  

Temporary differences

          

Foreign currency losses

     1,622,758       405,690       146,048       551,738       590,582  

Provision for judicial demands

     1,153,251       288,313       103,792       392,105       401,413  

Impairment

     815,190       203,798       73,367       277,165       290,470  

Business combination - Property, plant and equipment

     (48,998     (12,249     (4,410     (16,659     151,060  

Tax deductible goodwill

     (481,504     (120,376     (43,335     (163,711     (107,520

Gains or losses on actuarial liabilities

     412,687       103,171       37,141       140,312       138,655  

Allowance for doubtful accounts

     476,170       119,043       42,855       161,898       156,717  

Regulatory asset

     204,732       51,183       18,426       69,609       71,039  

Profit sharing

     43,770       10,942       3,940       14,882       28,923  

Concession contract

     (29,802     (7,450     (2,683     (10,133     (10,616

Business combination - Other fair value adjustments

     (122,735     (30,684     (11,046     (41,730     (42,360

Property, plant and equipment

     (279,790     (69,947     (25,182     (95,129     (55,861

Unrealized gains on derivatives instruments

     (103,069     (25,767     (9,275     (35,042     (992

Gain on formation of joint ventures

     (3,338,342     (834,586     (300,450     (1,135,036     (1,135,037

(-) Valuation allowance

     (4,383,705     (1,095,926     (394,534     (1,490,460     (1,753,070

Business combination - Intangible assets

     (10,406,892     (2,601,723     (936,620     (3,538,343     (3,743,218

Other

     936,879       234,219       84,318       318,537       354,406  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net liability

       (1,564,507     (562,009     (2,126,516     (2,060,563

Deferred income tax - Assets

           1,512,568       1,490,002  

Deferred income tax - Liabilities

           (3,639,084     (3,550,565
        

 

 

   

 

 

 

Total net deferred taxes

           (2,126,516     (2,060,563
        

 

 

   

 

 

 

c) Changes in deferred income taxes, net:

          

At December 31, 2016

           (2,060,563  
          

 

 

 

Recorded through income

             (67,396

Other (i)

             1,443  
          

 

 

 

At March 31, 2017

           (2,126,516  
          

 

 

 

 

(i) Exchange variation effect due to conversion of invested balance abroad.

 

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Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

22 Provision for legal proceedings

 

     Provision for legal proceedings      Judicial deposits  
     March 31,
2017
     December 31,
2016
     March 31,
2017
     December 31,
2016
 

Tax

     486,967        479,532        382,423        376,454  

Civil, regulatory and environmental

     344,840        344,048        175,364        173,884  

Labor

     448,975        444,984        175,475        164,346  
  

 

 

    

 

 

    

 

 

    

 

 

 
     1,280,782        1,268,564        733,262        714,684  
  

 

 

    

 

 

    

 

 

    

 

 

 

Changes in provision for legal proceedings:

 

     Tax      Civil, regulatory and
environmental
     Labor      Total  

December 31, 2016

     479,532        344,048        444,984        1,268,564  

Accruals

     772        3,484        25,556        29,812  

Disposal / Reversals

     (363      (11,141      (35,415      (46,919

Indexation and interest charges

     7,026        8,449        13,850        29,325  
  

 

 

    

 

 

    

 

 

    

 

 

 

March 31, 2017

     486,967        344,840        448,975        1,280,782  
  

 

 

    

 

 

    

 

 

    

 

 

 

Tax claims

a) Judicial claims deemed to be probable losses, fully accrued

 

     March 31, 2017      December 31, 2016  

Compensation with FINSOCIAL

     272,591        269,275  

State VAT - ICMS credits

     86,729        84,778  

INSS - Social security

     64,388        63,103  

PIS and COFINS

     2,185        2,449  

IPI - Excise tax credit - NT

     1,173        1,155  

Federal income taxes

     329        329  

Other

     59,572        58,443  
  

 

 

    

 

 

 
     486,967        479,532  
  

 

 

    

 

 

 

 

48


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

b) Judicial claims deemed as possible losses, and therefore not accrued

 

     March 31, 2017      December 31, 2016  

ICMS - State VAT (ii)

     2,340,575        2,136,241  

Federal income taxes

     2,237,536        2,188,011  

Foreign financial operation

     1,003,449        986,179  

PIS and COFINS - Revenue taxes

     866,216        850,063  

IRRF - Withholding tax

     877,681        861,531  

INSS - Social security and other

     623,837        615,403  

IPI - Excise tax credit - NT

     517,684        512,209  

Goodwill Rumo

     492,374        483,723  

Penalties related to tax positions

     407,131        397,441  

Compensation with IPI - IN 67/98

     129,618        128,456  

MP 470 - Tax installments (i)

     296,366        120,132  

Intermodal

     82,604        81,247  

Stock option

     63,300        62,216  

Financial transactions tax on loan

     49,927        54,896  

Social security contributions

     44,440        43,764  

Compensation credit award

     39,372        38,505  

Other

     1,012,433        992,682  
  

 

 

    

 

 

 
     11,084,543        10,552,699  
  

 

 

    

 

 

 

 

(i) The Tax Authority partially rejected the Company requests for payment of its federal tax debts, on the grounds that the tax loss offered is not sufficient to settle the respective debts. The likelihood of loss is considered as possible since the results are indicated existed and are available for such use.
(ii) ICMS Rumo Malha Paulista: Tax assessment notice issued by the São Paulo State Treasury Department, in the amount of R$ 155,860, against Rumo Malha Paulista S.A, covering the period from February 2011 to July 2015, with the indication of the follow infractions:

 

  a. Alleged lack of payment of ICMS on railroad services for export;

 

  b. Improper ICMS credit due to error in the book entry of values higher than those found in the Fiscal Books;

 

  c. Undue crediting of ICMS for acquisitions supposedly considered as “use and consumption”.

The Tax authorities also included fines of 50% of the value of the tax and 100% of the amount of the credit considered undue.

Civil, labor, regulatory and environmental

a) Judicial claims deemed to be probable losses, fully accrued

 

    Civil – refers mainly to compensation for material and moral damages, class actions for abstaining from straw burning sugarcane and execution of environmental nature.

 

    Labor – represent labor claims filed by former employees and employees of service providers who question, among others, payment of overtime, night and dangerous, job reinstatement, compensation for accidents at work and reimbursement of discounts from payroll, such as confederative and assistance contributions, union dues and other.

 

49


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

 

    Regulatory – mainly refers to fines and discussions with National Authority for Terrestrial Transport (ANTT).

 

    Environmental – these amounts derive from assessments made by the Environmental Sanitation Technology Company (CETESB-SP), Brazilian Institute of Environment and Natural Resources (IBAMA) and Environment Municipal Departments related to soil contamination and water by the overflow of products and non-compliance with conditions imposed by such operating license. In all cases, measures are being taken to reduce the existing liabilities, as well as repair and prevention measures.

b) Judicial claims deemed as possible losses, and therefore not accrued

The main civil and labor lawsuits, for which the unfavorable outcome is considered possible, are as follows:

 

     March 31, 2017      December 31, 2016  

Civil

     2,935,169        2,831,407  

Labor

     1,077,691        1,089,119  

Regulatory

     472,559        397,414  

Environmental

     367,394        351,915  
  

 

 

    

 

 

 
     4,852,813        4,669,855  
  

 

 

    

 

 

 

23 Shareholders’ equity

a) Share capital

As of March 31, 2017, Cosan Limited’s share capital is composed of the following:

 

Shareholders - Common shares

   Class A and /
or BDRs
     %      Class B1
shares
     %  

Controlling group

     14,514,418        8.32        96,332,044        100.00  

Skagen AS

     16,220,419        9.30        —          —    

M&G Investment Management Limited*

     6,056,705        3.47        —          —    

Eastspring Investments (Singapore) Limited*

     2,715,398        1.56        —          —    

Free Float

     128,851,899        73.90        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total shares outstanding

     168,358,839        96.56        96,332,044        100.00  
  

 

 

    

 

 

    

 

 

    

 

 

 

Treasury shares

     5,996,502        3.44        —          —    

Total

     174,355,341        100.00        96,332,044        100.00  
  

 

 

    

 

 

    

 

 

    

 

 

 

b) Treasury shares

The Company holds 5,996,502 Class A treasury shares as of March 31, 2017 and December 31, 2016 with a market value of U.S$ 8.54 per share at March 31, 2017 (U.S. $7.51 per share at December 31, 2016).

 

50


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

c) Other comprehensive (loss) income

 

     December 31,
2016
     Comprehensive
(loss) income
     March 31,
2017
 

Foreign currency translation effects

     (322,258      14,437        (307,821

Gain on cash flow hedge in joint ventures and subsidiaries

     (190,001      171,295        (18,706

Actuarial loss on defined benefit plan

     (29,017      —          (29,017

Financial instrument with subsidiary

     6,000        9,000        15,000  

Changes in fair value of available for sale securities

     (2,618      129        (2,489
  

 

 

    

 

 

    

 

 

 

Total

     (537,894      194,861        (343,033
  

 

 

    

 

 

    

 

 

 

Attributable to:

        

Owners of the Company

     (480,454      125,649        (354,805

Non-controlling interests

     (57,440      69,212        11,772  

 

51


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

24 Earnings per share

The following table sets forth the calculation of earnings per share (in thousands of Brazilian Reais, except per share amounts):

 

     March 31, 2017      March 31, 2016
(Restated)
 

Profit attributable from continued operation to ordinary equity holders for basic earnings

     21,115        125,042  

Profit attributable from discontinued operation to ordinary equity holders for basic earnings

     —          5,219  

Effect of dilution:

     

Dilutive effect of subsidiary’s stock option plan

     (665      (311

Dilutive effect of subsidiary’s stock option plan - Discontinued operation

     —          (15

Dilutive effect of put option

     (15,601      (15,601
  

 

 

    

 

 

 

Profit from continued operation attributable to ordinary equity holders adjusted for the effect of dilution

     4,849        109,130  
  

 

 

    

 

 

 

Profit from discontinued operation attributable to ordinary equity holders adjusted for the effect of dilution

     —          5,204  
  

 

 

    

 

 

 

Weighted average number of shares outstanding

     264,690,883        264,690,883  

Basic earnings per share from:

     

Continuing operations

   R$ 0.0798      R$ 0.4724  

Discontinuing operations

     —        R$ 0.0197  
  

 

 

    

 

 

 
   R$ 0.0798      R$ 0.4921  

Diluted earnings per share from:

     

Continuing operations

   R$ 0.0183      R$ 0.4123  

Discontinuing operations

     —        R$ 0.0197  
  

 

 

    

 

 

 
   R$ 0.0183      R$ 0.4320  

The non-controlling interests of the indirect subsidiary Brado have the right to exercise a liquidity option provided for in the shareholders’ agreement signed on August 5, 2013. This option would exchange all Brado shares held by such minority shareholders by shares of ALL. The exchange ratio shall take into account the economic value for both Brado and ALL shares. At the Company’s exclusive discretion, an equivalent cash payment is also possible.

At 31 March 2017, 3,035 options were excluded from the diluted weighted-average number of ordinary shares calculation because their effect would have been anti-dilutive.

 

52


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

25 Other (expense) income, net

 

     March 31,
2017
     March 31, 2016
(Restated)
 

Insurance reimbursement income

     1,181        7,150  

Rental income

     1,495        385  

Gain(Loss) on disposal of non-current assets

     2,485        (6,493

Net effect of legal proceedings, recoverable and tax installments

     (17,065      (37,869

Other

     (4,136      (527
  

 

 

    

 

 

 
     (16,040      (37,354
  

 

 

    

 

 

 

26 Financial results

 

     March 31,
2017
     March 31, 2016
(Restated)
 

Cost of gross debt

     

Interest on debt

     (486,116      (440,424

Monetary and exchange rate variation

     65,707        509,711  

Derivatives

     (135,662      (692,907

Amortization of borrowing costs

     (243      —    

Guarantees and warranties on debt

     (8,679      (13,474
  

 

 

    

 

 

 
     (565,993      (637,094

Income from financial investment

     196,670        115,885  
  

 

 

    

 

 

 
     196,670        115,885  
  

 

 

    

 

 

 

Cost of debt, net

     (368,323      (521,209

Other charges and monetary variations

     

Interest on other receivables

     48,898        67,457  

Monetary variation on leases and concessions agreements

     (73,127      (73,408

Monetary variation on leases

     (34,246      (50,705

Bank charges

     (63,736      (34,908

Advances on real state credits

     (7,002      (12,005

Interest on contingencies and contracts

     (19,791      (13,638

Interest on other liabilities

     (103,295      (186,873

Exchange variation

     2,230        14,235  
  

 

 

    

 

 

 
     (250,069      (289,845
  

 

 

    

 

 

 

(=) Financial results, net

     (618,392      (811,054

Finance expense

     (898,232      (878,868

Finance income

     283,009        246,552  

Exchange variation

     118,889        525,404  

Derivatives

     (122,058      (704,142
  

 

 

    

 

 

 

Financial results, net

     (618,392      (811,054
  

 

 

    

 

 

 

 

53


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

27 Financial instruments

Financial risk management
Overview
The Company is exposed to the following risks related to the use of financial instruments:

 

    Credit risk;

 

    Liquidity risk; and

 

    Market risk.

 

This note presents information about the exposure of the Company and its subsidiaries to the above risks, as well as the objectives of the Company’s risk management policies, these policy and processes for the assessment and management of risks.

The carrying amount of financial assets and financial liabilities are as follows:

 

     March 31,
2017
     December 31,
2016
 

Assets

     

Fair value through profit or loss

     

Investment funds

     3,022,732        3,203,907  

Marketable securities

     922,843        1,291,580  

Derivate financial instruments

     835,664        751,080  
  

 

 

    

 

 

 
     4,781,239        5,246,567  

Loans and receivables

     

Cash and cash equivalents

     3,521,358        1,295,681  

Trade receivables

     1,052,686        1,185,430  

Restricted cash

     225,144        200,999  

Receivables from related parties

     207,679        242,257  

Dividends receivable

     48,440        144,160  
  

 

 

    

 

 

 
     5,055,307        3,068,527  

Total

     9,836,546        8,315,094  
  

 

 

    

 

 

 

 

54


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

     March 31, 2017      December 31, 2016  

Liabilities

     

Liabilities amortized cost

     

Loans, borrowings and debentures

     16,702,340        14.525.030  

Leases

     1,255,274        1,397,543  

Real state credit certificates

     171,247        195,745  

Trade payables

     1,927,492        2,033,110  

Other financial liabilities

     223,560        203,303  

Payables to related parties

     256,008        237,081  

Dividends payable

     31,315        93,500  

Tax installments - REFIS

     216,293        215,565  

Preferred shareholders payable in subsidiaries

     1,809,176        1,769,427  
  

 

 

    

 

 

 
     22,592,705        20.670.304  

Fair value through profit or loss

     

Loans, borrowings and debentures

     3,738,450        3.813.467  

Contingent consideration

     113,657        166,807  

Derivative financial instruments

     336,616        295,844  
  

 

 

    

 

 

 
     4,188,723        4.276.118  
     26,781,428        24,946,422  
  

 

 

    

 

 

 

During the period ended at March 31, 2017, there was no reclassification between categories, fair value through profit or loss, loans and receivables and liabilities at the amortized cost presented above.

Risk management structure

As at March 31, 2017 and December 31, 2016, the fair values relating to transactions involving derivative financial instruments to protect the Company’s risk exposure were using observable inputs such as quoted prices in active markets, or discounted cash flows based on market curves, and are presented below:

 

     Notional      Fair value  
     March 31,      December 31,      March 31,      December 31,  
     2017      2016      2017      2016  

Exchange rate derivatives

           

Forward agreements

     10,251        438,689        (94      (14,983

Interest rate and exchange rate risk

           

Swap agreements (interest rate)

     1,985,931        1,988,540        245,525        104,491  

Swap agreements (exchange and interest rate)

     5,476,865        4,315,575        253,617        365,728  
  

 

 

    

 

 

    

 

 

    

 

 

 
     7,462,796        6,304,115        499,142        470,219  

Total financial instruments

           499,048        455,236  
        

 

 

    

 

 

 

Assets

           835,664        751,080  
        

 

 

    

 

 

 

Liabilities

           (336,616      (295,844
        

 

 

    

 

 

 

 

55


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

Credit risk

 

     March 31, 2017      December 31, 2016  

Cash and cash equivalents (i)

     6,544,090        4,499,588  

Trade receivables (ii)

     1,052,686        1,185,430  

Derivative financial instruments (iii)

     835,664        751,080  

Marketable securities (i)

     922,843        1,291,580  

Restricted cash (i)

     225,144        200,999  

Dividends receivable

     48,440        144,160  
  

 

 

    

 

 

 
     9,628,867        8,072,837  
  

 

 

    

 

 

 

 

(i) The cash and cash equivalents are held with bank and financial institution counterparties, which are rated AAA, AA, A and BBB.

The credit risk on cash and cash equivalents, marketable securities, other financial assets and derivative financial instruments are determined by rating instruments widely accepted by the market and are arranged as follows:

 

     March 31, 2017      December 31, 2016  

AAA

     599,801        —    

AA+

     541,897        —    

AA

     6,654,213        5,499,565  

A

     603,188        983,384  

BBB

     —          260,298  
  

 

 

    

 

 

 
     8,399,099        6,743,247  
  

 

 

    

 

 

 

 

(ii) Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored and any shipments to major customers are generally covered by letters of credit or other forms of credit insurance.

The requirement for impairment is analyzed at each reporting date on an individual basis for major clients. Additionally, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actual incurred historical data.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets. Management considers that the credit risk is covered by the allowance for doubtful accounts

 

(iii) Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed on an annual basis and may be updated throughout the year. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through potential counterparty’s failure to make payments.

 

56


Table of Contents

Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. As mentioned in Note 1, Management has been working on measures to enable the Company to honor its Commitments.

The non-derivative financial liabilities of the Company sorted by due dates (based on undiscounted cash flows contracted) are as follows:

 

                                   December  
     March 31, 2017     31, 2016  
     Up to 1                 More than              
     year     1 - 2 years     3 - 5 years     5 years     Total     Total  

Loans, borrowings and debentures

     (4,543,892     (4,933,735     (9,973,901     (12,954,674     (32,406,202     (29,957,136

Trade payables

     (1,926,919     (573     —         —         (1,927,492     (2,033,110

Other financial liabilities

     (223,560     —         —         —         (223,560     (203,303

REFIS

     (12,977     (12,390     (16,411     (191,983     (233,761     (235,919

Leases

     (649,901     (364,182     (560,733     (355,996     (1,930,812     (1,824,890

Real estate credits certificates

     (127,530     (66,721     —         —         (194,251     (243,628
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (7,484,779     (5,377,601     (10,551,045     (13,502,653     (36,916,078     (34,497,986
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Market risk

Market risk is the risk that changes in market prices – such as foreign exchange rates, interest rates and equity prices – will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Company uses derivatives to manage market risks. All such transactions are carried out within the guidelines set by the Risk Management Committee. Generally, the Company seeks to apply hedge accounting to manage volatility in profit or loss.

 

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Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

a) Foreign exchange risk

As at March 31, 2017 and December 31, 2016, the Company and its subsidiaries had the following net exposure to the exchange rate variations on assets and liabilities denominated in Brazilian Reais:

 

     March 31, 2017      December 31, 2016  
     R$      US$      R$      US$  

Cash and cash equivalents

     2,743,241        865,812        424,334        130,200  

Trade receivables

     17,683        5,581        11,940        3,664  

Advances to suppliers

     —          —          58,866        18,062  

Trade payables

     —          —          (22,005      (6,752

Loans, borrowings and debentures

     (8,471,231      (2,673,662      (6,323,330      (1,940,207

Contingent consideration

     (15,256      (4,815      (68,388      (20,984

Derivative financial instruments

     4,600,012        1,451,841        6,413,619        1,967,911  
  

 

 

    

 

 

    

 

 

    

 

 

 

Foreign exchange exposure, net

     (1,125,551      (355,243      495,036        151,894  
  

 

 

    

 

 

    

 

 

    

 

 

 

Sensitivity analysis on changes in foreign exchange rates:

The probable scenario was defined based on the U.S. Dollar market rates as at March 31, 2017, which determines the fair values of the derivatives at that date. Stressed scenarios (positive and negative effects, before tax effects) were defined based on changes of a 25% and 50% to the U.S. Dollar exchange rates used in the probable scenario.

Based on the financial instruments denominated in U.S. Dollars at March 31, 2017, the Company performed a sensitivity analysis by increasing and decreasing the exchange rate for R$/US$ by 25% and 50%. The probable scenario considers the estimated exchange rates at the due date of the transactions for the companies with functional currency Real (positive and negative, before tax effects), as follows:

 

     Exchange rate sensitivity analysis (R$/US$)  
            Scenario  
     March 31, 2017      Probable      25%      50%      -25%      -50%  

USD

     3.17        3.33        4.16        5.00        2.50        1.67  

The external source used by the company for market projections was a specialized consultant.

 

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Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

Considering the above scenario the profit or loss would be impacted as follows:

 

                Variation scenario  

Instrument

  

Risk factor

   Probable     25%     50%     -25%     -50%  

Cash and cash equivalents

  

USD fluctuation

     137,537       829,761       1,538,297       (587,315     (1,295,851

Trade receivables

  

USD fluctuation

     902       4,646       9,293       (4,646     (9,293

Exchange rate derivatives (i)

  

USD fluctuation

     559,898       178,030       327,498       (120,907     (270,375

Exchange rate and interest derivatives (i)

  

USD and CDI fluctuation

     160,924       1,084,739       2,160,781       (1,067,641)       (2,143,966)  

Loans, borrowings and debentures

   USD fluctuation      (282,463     (1,580,944     (3,036,084     1,329,337       2,784,477  

Contingent consideration

  

USD fluctuation

     (778     (4,008     (8,017     4,008       8,017  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Impacts on profit or loss

        576,020       512,224       991,768       (447,164     (926,991
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(i) For sensitivity analysis, it’s only considered exchange rate swaps for Notional.

b) Interest rate risk

The Company and its subsidiaries monitor the fluctuations in variable interest rates in connection with its borrowings, especially those that accrue interest using LIBOR, and uses derivative instruments in order to minimize variable interest rate fluctuation risks.

Sensitivity analysis on changes in interest rates:

A sensitivity analysis on the interest rates on loans and borrowings in compensation for the CDI investments with pre-tax increases and decreases of 25% and 50% is presented below:

 

     March 31, 2017  

Exposure interest rate (i)

   Probable     25%     50%     -25%     -50%  

Cash and cash equivalents

     391,581       97,895       195,790       (97,895     (195,790

Marketable securities

     34,875       8,719       17,438       (8,719     (17,438

Leases

     (62,431     (15,608     (22,384     15,608       22,384  

Advances on real state credits

     (20,183     (5,046     (10,091     5,046       10,091  

Interest rate derivatives

     234,030       272,098       601,841       (229,784     (423,669

Loans, borrowings and debentures net off derivatives

     (1,759,586     (628,131     (1,313,865     585,817       1,135,694  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Impacts on profit or loss

     (1,181,714     (270,073     (531,271     270,073       531,272  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The probable scenario considers the estimated interest rate, as follows:

 

     Probable     25%     50%     -25%     -50%  

SELIC

     8.75     10.94     13.13     6.56     4.38

CDI

     9.15     11.44     13.73     6.86     4.58

TJ462

     6.00     7.50     9.00     4.50     3.00

TJLP

     5.00     6.25     7.50     3.75     2.50

 

(i) The external source used by the company for market projections was a specialized consultant.

 

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Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

Financial instruments fair value

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

 

    The cash and cash equivalents, accounts receivable, trade receivables, trade payables and other current liabilities approximate their carrying amount largely due to the short-term maturity of these instruments.

 

    The fair values of the quoted notes and bonds are based on price quotations at the reporting date. The fair value of unquoted instruments, loans from banks and other financial liabilities, obligations under finance leases, as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

 

    The market value of the Senior Notes are listed on the Luxembourg Stock Exchange (Note 16) is based on their quoted market price are as follows:

 

Senior Notes Due    March 31, 2017   December 31, 2016

2018

   100.10%   95.68%

2023

   97.51%   96.05%

2024

   103.22%  

2027

   104,70%  

 

    The fair value of Perpetual Notes listed on the Luxembourg Stock Exchange (Note 16) is based on their quoted market price as March 31, 2017 of 100.57% (103.03% at December 31, 2016) of the face value of obligations at March 31, 2017.

 

    The fair value of other loans and financing, the respective market values substantially approximate the amounts recorded due to the fact that these financial instruments are subject to variable interest rates (Note 16).

The Company and its subsidiaries enter into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Derivatives valued using valuation techniques with observable market data refer mainly to interest rate swaps and foreign exchange forward contracts.

The fair value of derivative financial instruments is determined using valuation techniques and observable market data. The valuation techniques applied more often include pricing models and swaps contracts, with a present value calculation. The models consider various data, including counterparty credit quality, spot exchange rates, forward curves of interest rates and curves of the commodity term rates.

 

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Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

The carrying amounts and fair value of financial assets and financial liabilities are as follows:

 

     Carrying amount     Assets and liabilities measured at fair value  
     March 31,     December     March 31, 2017     December 31, 2016  
     2017     31, 2016     Level 2     Level 3     Level 2     Level 3  

Assets

            

Investment funds

     3,022,732       3,203,907       3,022,732       —         3,203,907       —    

Marketable securities

     922,843       1,291,580       922,843       —         1,291,580       —    

Derivate financial instruments

     835,664       751,080       835,664       —         751,080       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     4,781,239       5,246,567       4,781,239       —         5,246,567       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

            

Loans, borrowings and debentures

     (3,738,450     (3,813,467     (3,738,450     —         (3,813,467     —    

Contingent consideration

     (113,657     (166,807     —         (113,657     —         (166,807

Derivative financial instruments

     (336,616     (295,844     (336,616     —         (295,844     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     (4,188,723     (4,276,118     (4,075,066     (113,657     (4,109,311     (166,807
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Hedge accounting

Currently the Company has adopted the hedge accounting of fair value for some its operations that both the hedging instruments and the hedged items are accounted for at fair value through profit or loss. Operations and accounting effects of this adoption are as follows:

 

     Debt      Derivative      Total  

At December 31, 2016

     2,156,011        (125,272      2,030,739  

Interest amortization

     (9,596      (9,067      (18,663

Fair value

     (165,314      (7,989      (173,303
  

 

 

    

 

 

    

 

 

 

At March 31, 2017

     1,981,101        (142,328      1,838,773  
  

 

 

    

 

 

    

 

 

 

Capital management

The Company’s policy is to maintain a robust capital base to promote the confidence of investors, creditors and the market, and to ensure the future development of the business. Management monitors that the return on capital is adequate for each of its businesses.

28 Post-employment benefits

 

     March 31, 2017      December 31, 2016  

Futura

     44,726        43,401  

Futura II

     154        163  

COMGÁS

     402,794        397,916  
  

 

 

    

 

 

 
     447,674        441,480  
  

 

 

    

 

 

 

During the period ended March 31, 2017, the expense recognized in relation to the actuarial contributions was R$6,896 (R$6,921 for the three month period ended March 31, 2016).

 

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Cosan Limited

Notes to the consolidated interim financial statements

(In thousands of Brazilian Reais – R$, except earnings per share)

 

29 Share-based payment

(i) Share option programmers

The vesting period and share options outstanding at the end of the year are as follows:

 

                                                     Exercise         
                          Number of instruments on March 31, 2017      Market      price at      Fair value  
     Expected      Interest      Expected             Exercisable            price on      March      at grant  

Share option programs

   life (years)      rate      volatility      Granted      options     Outstanding      grant date      31, 2017      date -R$ (i)  

August 18, 2011 (A)

     1 to 7        12.39        31.44        4,825,000        (3,193,000     1,237,000        22.80        26.51        6.80  

August 18, 2011 (B)

     1 to 12        12.39        30.32        5,000,000        (2,000,000     3,000,000        22.80        26.51        8.15  

December 12, 2012 (C)

     1 to 7        8.78        31.44        700,000        (48,000     652,000        38.89        47.01        10.10  

April 24, 2013

     5 to 7        13.35        27.33        970,000        —         860,000        45.22        53.99        17.95  

April 25, 2014

     5 to 7        12.43        29.85        960,000        —         945,000        39.02        43.79        15.67  

August 31, 2015

     5 to 7        14.18        33.09        759,000        —         674,000        19.96        19.50        7.67  
           

 

 

    

 

 

   

 

 

          
              13,214,000        (5,241,000     7,368,000           
           

 

 

    

 

 

   

 

 

          

 

(i) The fair value of the employee share options has been measured using the Black-Scholes formula.

The number and weighted-average exercise prices of share options under the share option programs were as follows:

 

            Weighted-average exercise  
     Number of options      price - R$  

At December 31, 2016

     12,138,238        23.96  

Cancellation or settlements

     (4,160,238      —    

Share options exercised

     (610,000      26.43  
  

 

 

    

 

 

 

At March 31, 2017

     7,368,000        33.11  
  

 

 

    

 

 

 

(ii) Share-based compensation

On December 21, 2016, a new share-based compensation model was approved at the Assembly of the subsidiary Cosan Logística, which became effective as of the granting, which took place on January 2, 2017.

Cosan Logística issued 1,513,180 shares of the “share-based compensation plan”, which will be transferred in full and free of charge after 5 years, from the approval of the grant, in a quantity adjusted by the number proportional to the dividends paid in the period, conditioned to the exercise of the functions of the beneficiary in the Company, under the terms of each Share granting Program.

The Black and Scholes methodology was used to calculate the fair value of the shares granted under the terms of the “share-based compensation plan”, reflecting the determination of Technical Pronouncement CPC 10 - Share-based Payment. Given the characteristics of the Plan, the fair value is equivalent to the value of the share on the grant date (R$ 6.10).

 

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Cosan Limited

Notas explicativas às demonstrações financeiras consolidadas

(Em milhares de Reais – R$, exceto resultado por ação)

(Uma tradução livre do original em inglês)

 

30 Subsequent events

Distribution of dividends

On May 05, 2017, the Ordinary and Extraordinary General Meeting approved the distribution of dividends in the total amount of R$ 63,528 equivalent to R$ 0.24 per share.

Distribution of dividends - Cosan S.A Indústria e Comércio

On April 27, 2017, the Ordinary and Extraordinary General Meeting approved the distribution of dividends in the total amount of R$ 380,000 equivalent to R$ 0.931658 per common share

Stock option

On April 27, 2017, a new share option programs was approved in the Ordinary and Extraordinary General Meeting, where up to 3% of the shares representing the Company’s stock option may be delivered to the participants.

***

 

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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.

Date: May 11, 2017

 

COSAN LIMITED

 

By:  

/s/ Marcelo Eduardo Martins

Name:   Marcelo Eduardo Martins
Title:   Chief Financial Officer

 

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