Sunday, August 12, 2018

Sugar Prices Have Soured The Cosan Story

There's a lot more to Cosan Ltd. (CZZ) than sugar, but plunging global sugar prices are dominating the story at this Brazilian conglomerate and likely to continue to do so for the time being. Although the company is executing well in its fuel distribution, ethanol, gas, lubricant, and rail operations, sugar is a significant source of earnings, and there is only so much management can do to offset a global supply glut.

Even factoring in the weak sugar price outlook, Cosan Ltd. shares look significantly undervalued. Unfortunately, near-term sugar prices have long had a disproportionate influence on how Cosan Ltd. shares trade, and I'm not willing to just assume that's going to stop. Higher oil prices are supporting the ethanol business and the Rumo rail operations are performing much better, but it's going to take a more constructive market sentiment toward Brazil in general and sugar for these shares to get out of the doghouse.

Read the full article here:
Sugar Prices Have Soured The Cosan Story

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