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 November, 2016

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             X            

  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             X            

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             X            


COSAN LIMITED

 

Item

   
1.   Consolidated interim financial statements as at September 30, 2016 and independent auditors’ review report
2.   Signatures

 


 

Cosan Limited

Consolidated interim financial

statements as at September 30, 2016 and

independent auditors’ review report


Cosan Limited

Consolidated financial statements

For the three and nine month periods ended on September 30, 2016 and 2015

 

 

Contents

      

Report on review of interim financial information

     3   

Consolidated statements of financial position

     4   

Consolidated statements of profit or loss and other comprehensive income

     6   

Consolidated statements of changes in equity

     8   

Consolidated statements of cash flows

     10   

Notes to the consolidated financial statements

     12   


Report on review of interim financial information – ITR

To the Board of Directors and Shareholders of

Cosan Limited

Bermuda

Introduction

We have reviewed the accompanying consolidated interim financial information of Cosan Limited (“The Company”), contained in the Quarterly Information Form—ITR for the quarter ended September 30, 2016, which comprises the statement of financial position as of September 30, 2016 and the respective statements of profit or loss and comprehensive income (loss) for the three and nine-month periods then ended and changes in equity and cash flows for the nine-month period then ended, including the footnotes.

Management is responsible for the preparation of the consolidated interim financial information in accordance with IAS 34—Interim Financial Reporting, issued by the International Accounting Standards Board—IASB, such as for the presentation of this information in accordance with the regulations of the Brazilian Securities Commission—CVM, applicable to the preparation of Quarterly Information—ITR. Our responsibility is to express a conclusion on this consolidated interim financial information based on our review.

Review scope

We conducted our review in accordance with the Brazilian and International standards on review engagements of interim financial information (NBC TR 2410—Review of Interim Financial Information Performed by the Independent Auditor of the Entity 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 applicable to the preparation of Quarterly Information—ITR, and presented in accordance with the regulations of the Brazilian Securities Commission—CVM.

São Paulo, November 9, 2016

KPMG Auditores Independentes

CRC 2SP014428/O-6

Rogério Hernandez Garcia

Contador CRC 1SP213431/O-5

 

1


Cosan Limited

Consolidated statements of financial position

(In thousands of Brazilian Reais - R$)

 

 

 

     Note      September 30, 2016      December 31, 2015
(Restated)
 

Assets

        

Cash and cash equivalents

     6         3,147,964         3,505,824   

Restricted cash

        —           57,290   

Marketable securities

     7         1,385,289         605,490   

Trade receivables

     8         1,047,026         904,245   

Derivative financial instruments

     27         24,382         138,105   

Inventories

        690,351         656,901   

Receivables from related parties

     10         64,342         75,229   

Income tax receivable

        299,684         135,050   

Other current tax receivable

     9         212,293         311,892   

Dividends receivable

        6,291         12,064   

Assets held for sale

     13         3,067,056         149,938   

Other financial assets

        —           144,208   

Other current assets

        196,249         138,995   
     

 

 

    

 

 

 

Total current assets

        10,140,927         6,835,231   

Trade receivables

     8         60,806         60,733   

Restricted cash

        195,461         200,893   

Deferred tax assets

     21         1,430,900         1,698,611   

Receivables from related parties

     10         178,992         221,345   

Income tax receivable

        123,176         274,597   

Other non-current tax receivable

     9         691,695         633,549   

Judicial deposits

     22         695,593         680,224   

Derivative financial instruments

     27         1,200,694         2,292,191   

Other non-current assets

        1,166,574         1,185,787   

Investments in associates

     11         204,993         184,376   

Investments in joint ventures

     12         8,501,602         8,237,190   

Investment property

     13         —           2,595,035   

Property, plant and equipment

     14         10,695,143         9,805,887   

Intangible assets and goodwill

     15         17,139,989         17,309,689   
     

 

 

    

 

 

 

Total non-current assets

        42,285,618         45,380,107   
     

 

 

    

 

 

 

Total assets

        52,426,545         52,215,338   
     

 

 

    

 

 

 

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

 

 

2


Cosan Limited

Consolidated statements of financial position

(In thousands of Brazilian Reais - R$)

 

 

 

     Note      September 30, 2016     December 31, 2015
(Restated)
 

Liabilities

       

Loans, borrowings and debentures

     16         2,424,364        2,775,510   

Leases

     17         543,438        539,615   

Real estate credit certificates

        101,545        88,089   

Derivative financial instruments

     27         92,388        812   

Trade payables

     19         1,914,837        1,963,981   

Employee benefits payable

        235,585        256,279   

Income tax payables

        121,435        59,620   

Other taxes payable

     20         177,506        153,540   

Concessions payables

     18         27,575        20,205   

Dividends payable

        22,480        39,934   

Payables to related parties

     10         230,996        204,080   

Deferred revenue

        14,167        110,517   

Other financial liabilities

        248,374        236,698   

Liabilities held for sale

     13         235,392        —     

Other current liabilities

        354,034        473,753   
     

 

 

   

 

 

 

Total current liabilities

        6,744,116        6,922,633   
     

 

 

   

 

 

 

Loans, borrowings and debentures

     16         15,349,047        16,053,693   

Leases

     17         990,680        1,202,086   

Real estate credit certificates

        119,031        196,917   

Preferred shareholders payable in subsidiaries

        2,023,988        2,042,878   

Derivative financial instruments

     27         536,260        741,686   

Trade payables

     19         817        1,031   

Other taxes payable

     20         37,723        51,327   

Provision for legal proceedings

     22         1,268,709        1,193,931   

Concessions payables

     18         2,483,589        2,204,039   

Post-employment benefits

     28         358,065        344,447   

Deferred tax liabilities

     21         3,665,644        4,179,564   

Deferred revenue

        64,844        95,730   

Other non-current liabilities

        807,977        723,034   
     

 

 

   

 

 

 

Total non-current liabilities

        27,706,374        29,030,363   
     

 

 

   

 

 

 

Total liabilities

        34,450,490        35,952,996   
     

 

 

   

 

 

 

Shareholders’ equity

     23        

Share capital

        5,328        5,328   

Additional paid-in capital

        4,052,683        4,006,562   

Accumulated other comprehensive loss

        (470,625     (478,207

Retained earnings

        2,654,962        2,425,567   
     

 

 

   

 

 

 

Equity attributable to:

       

Owners of the Company

        6,242,348        5,959,250   

Non-controlling interests

     11         11,733,707        10,303,092   
     

 

 

   

 

 

 

Total shareholders’ equity

        17,976,055        16,262,342   
     

 

 

   

 

 

 

Total shareholders’ equity and liabilities

        52,426,545        52,215,338   
     

 

 

   

 

 

 

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

 

 

3


Cosan Limited

Consolidated statements of profit or loss and other comprehensive income

For the three and nine month periods ended September 30, 2016 and 2015

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

 

 

 

     Note      July 1, 2016 to
September 30,
2016
    January 1, 2016
to September 30,
2016
    July 1, 2015 to
September 30,
2015 (Restated)
    January 1, 2015
to September 30,
2015 (Restated)
 

Net sales

        3,272,803        9,732,259        3,573,442        8,999,275   

Cost of sales

        (2,036,006     (6,097,797     (2,518,408     (6,270,117
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        1,236,797        3,634,462        1,055,034        2,729,158   
     

 

 

   

 

 

   

 

 

   

 

 

 

Selling expenses

        (265,564     (760,200     (233,615     (673,976

General and administrative expenses

        (231,196     (729,258     (237,018     (636,141

Other (expense) income, net

     25         (16,902     (83,219     (1,234     (83,422
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        (513,662     (1,572,677     (471,867     (1,393,539
     

 

 

   

 

 

   

 

 

   

 

 

 

Income before equity in earnings of investees and financial results

        723,135        2,061,785        583,167        1,335,619   
     

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings of investees

           

Equity in earnings of associates

     11         8,393        3,235        4,493        1,515   

Equity in earnings of joint ventures

     12         404,245        1,098,183        24,917        252,014   
     

 

 

   

 

 

   

 

 

   

 

 

 
        412,638        1,101,418        29,410        253,529   

Financial results

           

Finance expense

        (1,140,312     (2,859,507     (666,221     (1,609,950

Finance income

        263,408        834,976        194,875        382,222   

Foreign exchange (losses) gain, net

        (47,689     1,011,866        (271,185     (764,917

Derivatives

        156,206        (1,317,265     206,988        582,516   
     

 

 

   

 

 

   

 

 

   

 

 

 
     26         (768,387     (2,329,930     (535,543     (1,410,129

Profit before taxes

        367,386        833,273        77,034        179,019   
     

 

 

   

 

 

   

 

 

   

 

 

 

Income tax (expenses) benefits

     21            

Current

        (2,593     (216,540     (26,301     (143,346

Deferred

        (67,353     64,562        13,013        133,569   
     

 

 

   

 

 

   

 

 

   

 

 

 
        (69,946     (151,978     (13,288     (9,777
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit from continuing operations

        297,440        681,295        63,746        169,242   

Profit from discontinued operation, net of tax

     13         18,312        58,860        12,857        57,561   
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the period

        315,752        740,155        76,603        226,803   
     

 

 

   

 

 

   

 

 

   

 

 

 

 

4


Cosan Limited

Consolidated statements of profit or loss and other comprehensive income

For the three and nine month periods ended September 30, 2016 and 2015

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

 

 

 

Other comprehensive income (loss)

           

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

           

Foreign currency translation effect

        (4,009     141,946        (126,652     (193,689

Loss on cash flow hedge in joint ventures and subsidiary

        (34,006     (174,743     (96,987     (40,459

Financial instruments—common transactions

        —          6,000        —          —     

Changes in fair value of available for sale securities

        1,903        592        2,485        7,483   

Taxes on items that may be reclassified to profit or loss

        (1,541     342        (802     (2,875
     

 

 

   

 

 

   

 

 

   

 

 

 
        (37,653     (25,863     (221,956     (229,540

Total other comprehensive loss, net of tax

        (37,653     (25,863     (221,956     (229,540
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

        278,099        714,292        (145,353     (2,737
     

 

 

   

 

 

   

 

 

   

 

 

 

Total net income attributable to:

           

Owners of the Company

        158,193        315,865        46,002        48,975   

Non-controlling interests

        157,559        424,290        30,601        177,828   
     

 

 

   

 

 

   

 

 

   

 

 

 
        315,752        740,155        76,603        226,803   

Total comprehensive income attributable to:

           

Owners of the Company

        130,273        323,447        (125,791     (148,060

Non-controlling interests

        147,826        390,845        (19,562     145,323   
     

 

 

   

 

 

   

 

 

   

 

 

 
        278,099        714,292        (145,353     (2,737

Basic earnings per share from:

     24            

Continuing operations

      R$ 0.59765      R$ 1.19333      R$ 0.17380      R$ 0.18503   

Discontinuing operations

      R$ 0.01554      R$ 0.05853      R$ 0.01329      R$ 0.04749   
     

 

 

   

 

 

   

 

 

   

 

 

 
      R$ 0.61319      R$ 1.25186      R$ 0.18709      R$ 0.23252   

Diluted earnings per share from:

     24            

Continuing operations

      R$ 0.53477      R$ 1.12787      R$ 0.11335      R$ 0.12564   

Discontinuing operations

      R$ 0.01545      R$ 0.05836      R$ 0.01329      R$ 0.04749   
     

 

 

   

 

 

   

 

 

   

 

 

 
      R$ 0.55022      R$ 1.18623      R$ 0.12664      R$ 0.17313   

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

 

 

5


Cosan Limited

Consolidated statements of changes in equity

For the nine month period ended September 30, 2016 and 2015

(In thousands of Brazilian Reais - R$)

 

 

 

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

At January 01, 2016

     5,328         4,006,562        (478,207     2,483,283        6,016,966        10,337,706        16,354,672   

Effect of changes to IAS 41

               

–in joint ventures (Note 2.2)

     —           —          —          (57,716     (57,716     (34,614     (92,330
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At January 01, 2016 (Restated)

     5,328         4,006,562        (478,207     2,425,567        5,959,250        10,303,092        16,262,342   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net profit for the period

     —           —          —          315,865        315,865        424,290        740,155   

Other comprehensive income:

               

Loss on cash flow hedge injoint ventures and subsidiary

     —           —          (108,393     —          (108,393     (65,807     (174,200

Foreign currency translation effects

     —           —          112,249        —          112,249        29,697        141,946   

Financial instruments—common transactions

     —           —          3,751        —          3,751        2,249        6,000   

Change in fair value of available for sale securities

     —           —          (25     —          (25     416        391   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

     —           —          7,582        315,865        323,447        390,845        714,292   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Contributions by and distributions to owners of the Company:

               

Dividends—non-controlling interests

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

Share options exercised

     —           10,917        —          —          10,917        6,268        17,185   

Dividends

     —           —          —          (86,470     (86,470     (687,799     (774,269

Share-based compensation—Subsidiaries

     —           4,742        —          —          4,742        4,101        8,843   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total contributions by and distributions to owners of the Company

     —           8,568        —          (86,470     (77,902     (670,339     (748,241
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners of the Company

               

Change of shareholding interest in subsidiary

     —           37,553        —          —          37,553        1,710,109        1,747,662   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At September 30, 2016

     5,328         4,052,683        (470,625     2,654,962        6,242,348        11,733,707        17,976,055   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

 

6


Cosan Limited

Consolidated statements of changes in equity

For the nine month period ended September 30, 2016 and 2015

(In thousands of Brazilian Reais - R$)

 

 

 

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

At January 1, 2015

     5,328         3,887,109        (165,618     2,117,739        5,844,558        7,644,749        13,489,307   

Effect of changes to IAS 41

               

–in joint ventures

     —           —          —          (7,457     (7,457     (4,472     (11,929
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At January 1, 2015 (Restated)

     5,328         3,887,109        (165,618     2,110,282        5,837,101        7,640,277        13,477,378   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net profit for the period

     —           —          —          48,975        48,975        177,828        226,803   

Other comprehensive income:

               

Gain on cash flow hedge in joint ventures and subsidiary

     —           —          (25,498     —          (25,498     (15,292     (40,790

Foreign currency translation effects

     —           —          (172,287     —          (172,287     (21,402     (193,689

Change in fair value of available for sale securities

     —           —          750        —          750        4,189        4,939   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

     —           —          (197,035     48,975        (148,060     145,323        (2,737
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Contributions and distributions for shareholders

               

Dividends—non-controlling interests

     —           (1,965     —          —          (1,965     1,965        —     

Dividends

     —           —          —          (94,246     (94,246     (299,462     (393,708

Share based compensation—Subsidiaries

     —           5,496        —          —          5,496        3,293        8,789   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total contributions by and distributions to owners of the Parent

     —           3,531        —          (94,246     (90,715     (294,204     (384,919
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with shareholders

               

Acquisition of non-controlling interest

     —           636        —          —          636        (10,838     (10,202

Business combination ALL

     —           118,937        —          —          118,937        2,829,498        2,948,435   

Share buy-back cost—Rumo

     —           (3,901     —          —          (3,901     (21,202     (25,103
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     —           115,672        —          —          115,672        2,797,458        2,913,130   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At September 30, 2015

     5,328         4,006,312        (362,653     2,065,011        5,713,998        10,288,854        16,002,852   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

 

7


Cosan Limited

Consolidated statements of cash flows

For the nine month periods ended September 30, 2016 and 2015

(In thousands of Brazilian Reais - R$)

 

 

 

     Note      January 1,
2016 to
September 30,
2016
    January 1,
2015 to
September 30,
2015
(Restated)
 

Cash flows from operating activities

       

Profit before taxes

        833,273        179,019   

Profit before taxes discontinued operation

     13         72,020        67,889   

Adjustments for:

       

Depreciation and amortization

        1,252,911        820,066   

Equity in earnings of associates

     11         (3,235     (1,515

Equity in earnings of joint ventures

     12         (1,098,183     (252,014

Losses on disposals of assets

        12,347        5,884   

Option shares expense

        8,843        8,789   

Change in fair value of investment property

        (9,692     (23,162

Provision for legal proceedings

        79,431        37,092   

Indexation charges, interest and exchange, net

        2,549,541        1,574,174   

Take or pay

        (107,488     —     

Other

        54,019        169,426   
     

 

 

   

 

 

 
        3,643,787        2,585,648   

Changes in:

       

Trade receivables

        (117,863     (72,945

Inventories

        (46,070     (113,639

Recoverable taxes

        188,577        (35,375

Related parties

        17,545        (22,539

Trade payables

        (75,283     527,186   

Other financial liabilities

        (49,327     —     

Employee benefits

        (92,494     (35,824

Provision for legal proceedings

        (58,224     (21,158

Judicial deposits

        (14,369     (2,825

Post-employment benefits

        (20,744     (17,711

Income tax and other tax

        (94,618     (76,051

Concessions payable

        (80,714     (17,711

Other assets and liabilities, net

        (193,462     (162,868
     

 

 

   

 

 

 
        (637,046     (51,460

Net cash generated by operating activities

        3,006,741        2,534,188   

Cash flows from investing activities

       

Capital contribution in associates

        (21,376     (59,747

Non-controlling interest acquisition

        (54,122     —     

Marketable securities

        (876,444     (161,405

Restricted cash

        64,700        57,490   

Dividends received from associates

        12,526        1,150   

Dividends received from joint ventures

        658,392        206,425   

Net cash acquired in business combination

        —          169,703   

Put option exercised paid

        (186,052     —     

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

        (1,596,658     (1,337,715

Related parties

        11,338        —     
     

 

 

   

 

 

 

Net cash used in investing activities

        (1,987,696     (1,124,099
     

 

 

   

 

 

 

 

8


Cosan Limited

Consolidated statements of cash flows

For the nine month periods ended September 30, 2016 and 2015

(In thousands of Brazilian Reais - R$)

 

 

 

Cash flows from financing activities

       

Loans and borrowings and debentures raised

        5,933,587        3,052,947   

Payment of principal on loans, borrowings and debentures

        (6,218,311     (2,556,574

Payment of interest on loans, borrowings and debentures

        (1,104,575     (915,993

Payment of principal on leases

        (322,455     (194,088

Payment of interest on leases

        (266,173     (108,685

Non-controlling interest capital increase

        1,979,894        —     

Real state credits certificate

        (95,740     (66,482

Related parties

        —          (3,803

Non-controlling interest subscription

        28,764        —     

Derivative financial instruments

        (248,663     225,973   

Dividends paid

        (968,778     (410,533

Treasury shares

        17,185        (12,186
       

Net cash used in financing activities

        (1,265,265     (989,424
     

 

 

   

 

 

 

(Decrease) increase in cash and cash equivalents

        (246,220     420,665   
     

 

 

   

 

 

 

Cash and cash equivalents at beginning of period

        3,505,824        1,649,340   
     

 

 

   

 

 

 

Effect of exchange rate fluctuations on cash held

        (101,707     56,803   
     

 

 

   

 

 

 

Cash and cash equivalents at end of period

     6         3,157,897        2,126,808   
     

 

 

   

 

 

 

Supplemental cash flow information

       

Income taxes paid

        58,943        81,067   

Business combination—non-cash effect

        —          2,537,831   

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

 

 

9


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

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 62.41% and 72.75% 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 Logística Operadora Multimodal S.A. (“Rumo”) and América Latina Logística S.A. (“ALL”), logistic segment (“Logistic”); (iii) Purchase, sale and leasing of agricultural land through its subsidiaries, Radar Propriedades Agrícolas S.A. and Radar II Propriedades Agrícolas S.A. (“Radar”); (iv) Production and distribution of lubricants, through its indirect subsidiaries Cosan Lubrificantes e Especialidades S.A. (“CLE”) 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 (v) 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 September 30, 2016, Cosan Logística had a negative consolidated working capital of R$694,271 and loss for the period of R$42,641. Nevertheless, it presented a net cash generation from operations of R$1,434,484 and made investments in the modernization of its fleet and improving the railway network in the amount of R$1,264,952, in line with its business plan.

On September 30, 2016 the Company disclosed a material fact stating that it has signed a Share Purchase Agreement with Mansilla Participações Ltda. (Vehicle TIAA investment fund—Teachers Insurance and Annuity Association of America), a shareholder of Radar and Radar II, committing to sell part of its shares of Radar I and Radar II, see note 13.

 

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), and in accordance with the regulations issued by the Brazilian Securities Commission—CVM applicable to the preparation of the Quarterly Information—ITR. 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, 2015.

 

 

10


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

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, 2015, except for the adoption of new standards and interpretations effective as of January 1, 2016. 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 financial statements were authorized for issue by the Board of Directors on November 09, 2016.

 

2.2 New standards, interpretations and amendments adopted by the Company—Restated

The accounting effects of the ALL acquisition are presented in the note 4 and the financial position and consolidated results of operations for the current period are not necessarily comparable with the information presented in the previous period.

Although the new standards and amendments below apply for the first time in 2016, they do not have a material impact on the annual consolidated financial statements or the interim consolidated financial statements of the Company. The nature and the impact of each new standard or amendment are described below:

Ø Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants

The amendments change the accounting requirements for biological assets that meet the definition of bearer plants. Under the amendments, biological assets that meet the definition of bearer plants will no longer be within the scope of IAS 41 Agriculture . Instead, IAS 16 will apply. After initial recognition, bearer plants will be measured under IAS 16 at accumulated cost (before maturity) and using either the cost model. The amendments also require that produce that grows on bearer plants will remain in the scope of IAS 41 measured at fair value less costs to sell. For government grants related to bearer plants, IAS 20 Accounting for Government Grants and Disclosure of Government Assistance will apply. These amendments substantially impact the jointly controlled company, Raízen Energia, do not have any effect to the Company since it does not have any bearer plants.

Ø Discontinued operation

According to the note 13, 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 nine-month period ended September 30, 2015.

 

 

11


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

The impact of both restatements for the year ended December 31, 2015, as follows:

Consolidated statements of financial position

 

     December 31, 2015  
     As issued     IAS 41 effect     Restated  

Assets

      

Current assets

     6,835,231        —          6,835,231   

Investments in joint ventures

     8,329,520        (92,330     8,237,190   

Other non-current assets

     37,142,917        —          37,142,917   
  

 

 

   

 

 

   

 

 

 

Total assets

     52,307,668        (92,330     52,215,338   
  

 

 

   

 

 

   

 

 

 

Liabilities

      

Current liabilities

     6,922,633        —          6,922,633   

Non-current liabilities

     29,030,363        —          29,030,363   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     35,952,996        —          35,952,996   
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity

      

Share capital

     5,328        —          5,328   

Additional paid-in capital

     4,006,562        —          4,006,562   

Accumulated other comprehensive loss

     (478,207     —          (478,207

Retained earnings

     2,483,283        (57,716     2,425,567   
  

 

 

   

 

 

   

 

 

 

Equity attributable to owners of the Company

     6,016,966        (57,716     5,959,250   

Non-controlling interests

     10,337,706        (34,614     10,303,092   
  

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     16,354,672        (92,330     16,262,342   
  

 

 

   

 

 

   

 

 

 

Total shareholders’ equity and liabilities

     52,307,668        (92,330     52,215,338   
  

 

 

   

 

 

   

 

 

 

 

12


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

Consolidated statements of profit or loss

 

     July 1, 2015
to September 30,
2015

(as issued)
    IAS 41
effect
    Discontinued
operation
    July 1, 2015
to September 30,
2015

(restated)
    January 1,
2015 to
September 30,
2015

(as issued)
    IAS 41
effect
    Discontinued
operation
    January 1,
2015 to
September 30,
2015

(restated)
 

Gross profit

     1,076,207        —          (21,173     1,055,034        2,791,596        —          (62,438     2,729,158   

Operating expense

     (479,874     —          8,007        (471,867     (1,394,958     —          1,419        (1,393,539
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before equity in earnings of investees and financial results

     596,333        —          (13,166     583,167        1,396,638        —          (61,019     1,335,619   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings of associates

     4,493        —          —          4,493        1,515        —          —          1,515   

Equity in earnings of joint ventures

     28,767        (3,850     —          24,917        276,811        (24,797     —          252,014   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     33,260        (3,850     —          29,410        278,326        (24,797     —          253,529   

Financial results

     (532,344     —          (3,199     (535,543     (1,403,259     —          (6,870     (1,410,129
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit before taxes

     97,249        (3,850     (16,365     77,034        271,705        (24,797     (67,889     179,019   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense

     (16,796     —          3,508        (13,288     (20,105     —          10,328        (9,777
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit from continuing operations

     80,453        (3,850     (12,857     63,746        251,600        (24,797     (57,561     169,242   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit from discontinued operations, net of tax

     —          —          12,857        12,857        —          —          57,561        57,561   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the period

     80,453        (3,850     —          76,603        251,600        (24,797     —          226,803   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to:

                

Owners of the Company

     48,410        (2,408     —          46,002        64,474        (15,499     —          48,975   

Non-controlling interests

     32,043        (1,442     —          30,601        187,126        (9,298     —          177,828   

 

13


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

3 Significant accounting policies

The accounting policies set out below have been applied consistently by the Company to all periods presented.

 

3.1 Basis of consolidation

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

 

     September 30, 2016     December 31, 2015  

Directly owned subsidiaries

    

Cosan Logística S.A.

     72.75     63.27

Cosan S.A. Indústria e Comércio

     62.41     62.51

Interest of Cosan S.A. in its subsidiaries

    

Águas da Ponte Alta S.A. (ii)

     65.00     65.00

Bioinvestments Negócios e Participações S.A. (ii)

     65.00     65.00

Comma Oil Chemicals Limited

     100.00     100.00

Companhia de Gás de São Paulo—COMGÁS (i)

     62.65     61.33

Cosan Biomassa S.A.

     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

Nova Agrícola Ponte Alta S.A. (ii)

     29.50     29.50

Nova Amaralina S.A. Propriedades Agrícolas. (ii)

     29.50     29.50

Nova Santa Barbara Agrícola S.A. (ii)

     29.50     29.50

Pasadena Empreendimentos e Participações S.A.

     100.00     100.00

Proud Participações S.A.

     65.00     65.00

Radar II Propriedades Agrícolas S.A. (ii)

     65.00     65.00

Radar Propriedades Agrícolas S.A. (ii)

     29.50     29.50

Terras da Ponte Alta S.A. (ii)

     29.50     29.50

Vale da Ponte Alta S.A. (ii)

     65.00     65.00

Zip Lube S.A.

     100.00     100.00

 

14


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

Interest of Cosan

    

Logística S.A. in its subsidiaries

    

ALL – América Latina Logística Argentina S.A.

     25.81     23.89

ALL – América Latina Logística Armazéns Gerais Ltda.

     28.37     26.26

ALL – América Latina Logística Central S.A.

     20.87     19.31

ALL – América Latina Logística Equipamentos Ltda. (iii)

     —          26.26

ALL – América Latina Logística Intermodal S.A.

     28.37     26.26

ALL – América Latina Logística Malha Norte S.A.

     28.16     26.06

ALL – América Latina Logística Malha Oeste S.A.

     28.37     26.26

ALL – América Latina Logística Malha Paulista S.A.

     28.37     26.26

ALL – América Latina Logística Malha Sul S.A.

     28.37     26.26

ALL – América Latina Logística Mesopotâmica S.A.

     20.02     18.53

ALL – América Latina Logística Participações S.A. (iii)

     —          26.26

ALL – América Latina Logística Rail Management Ltda.

     14.19     13.13

ALL – América Latina Logística S.A.

     28.37     26.26

ALL – América Latina Logística Serviços Ltda.

     28.37     26.26

Boswells S.A.

     28.37     26.26

Brado Holding S.A.

     28.37     26.26

Brado Logística e Participações S.A.

     17.65     16.34

Brado Logística S.A.

     17.65     16.34

Logispot Armazéns Gerais S.A.

     14.47     13.39

Paranaguá S.A.

     28.32     26.22

PGT—Grains Terminal S.A.

     28.37     26.26

Portofer Transporte Ferroviário Ltda.

     28.37     26.26

Rumo Logística Operadora Multimodal S.A.

     28.37     26.26

 

(i) From September 30, 2016, the Company increased its share in Comgás to 62.65% through the purchase 1,171,000 common shares owned by non-controlling shareholders.
(ii) On September 30, 2016 the Company announced the sale of control of the Radar segment to Mansilla Participações Ltda. (Vehicle TIAA investment fund—Teachers Insurance and Annuity Association of America), as stated in note 13.
(iii) Incorporated in March 1, 2016 by ALL Intermodal S.A.

 

3.2 New standards and interpretations not yet adopted

 

  IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement.

IFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. The Company has yet to assess IFRS 9’s full impact.

IFRS 9 is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted.

 

 

15


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

  IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11—Construction Contracts and IFRIC 13—Customer Loyalty Programmers. IFRS 15 is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted.

The Company is currently assessing the potential impacts of adopting IFRS 15.

 

  IFRS 16—Leases was issued on January 13, 2016. IFRS 16 eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. For lessees, the lease becomes an on-balance sheet liability that attracts interest, together with a new asset on the other side of the balance sheet. In other words, lessees will appear to become more asset-rich but also more heavily indebted. The new standard takes effect in January 2019. Management is assessing the impact of its adoption.

There are no other IFRS or IFRIC interpretations that are not yet effective and that are expected to have a significant impact on the Company.

 

4 Business combinations

On April 1, 2015, after the necessary approvals from the competent bodies, the subsidiary “RUMO” incorporated 100% of the common shares of ALL and, through a shareholders’ agreement, now holds its full control and consolidate its results.

The merger took place by exchange of shares, with the issue by Rumo, of 1,963,670,770 registered common shares with no par value, representing 65.67% of its equity in exchange for 100% of the share capital of ALL , represented by 681,995,165 common shares.

As a result of the acquisition, the Company consolidates its participation strategy in the logistics segment and infrastructure in Brazil, incorporating approximately 12,000 km of rail present in ALL concessions.

 

a) Consideration transferred

The fair value of the ordinary shares issued was based on the listed share price of the ALL (ticker – ALL3.SA) as at March 31, 2015 of R$3.97 per share. Additionally, the value was adjusted by the settlement of pre-existing relationship, as follows:

 

     In thousands of R$  

Equity instruments (681,995,165 common shares)

     2,707,534   

Settlement of pre-existing relationship

     29,838   
  

 

 

 

Total consideration transferred

     2,737,372   
  

 

 

 

 

16


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

  (i) Settlement of pre-existing relationship

In March 2009, Rumo and ALL entered into an operating agreement (pre-existing relationship) for the supply of sugar transport logistics and other grains from the western region of the state of São Paulo to the Port of Santos, in which Rumo has port concessions for lifting services.

According to the terms of the existing agreement, Rumo invested in the construction and improvement of permanent roads under concession of ALL and acquisition of rolling stock for use in the transport of products in the rail network, in order to increase rail freight transport capacity in ALL. In exchange for the Company’s investments, the agreement stipulated that ALL should provide a certain capacity of rail transport services, as well as compensate Rumo through the payment of a fee, fixed contractually, per ton of product transported by ALL on the rail network and / or by the use of undercarriage given by Rumo to ALL.

This pre-existing relationship was settled when Rumo acquired ALL. As a result of this settlement, Rumo recorded a gain of R$ 29,838 in the profit or loss as “other operating income”.

The fair value of the settlement of pre-existing relationship has been the difference between the value of the investment made by Rumo and the discounted cash flow of the remuneration of such investment, considering the volume and contractually agreed rate.

 

17


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

b) Identifiable assets acquired and liabilities assumed

The following table summarizes the recognized amounts of assets acquired and liabilities assumed at the date of acquisition:

 

Description

  

Cash and cash equivalents

     169,703   

Investment securities

     940,689   

Trade receivables

     382,576   

Inventories

     79,115   

Other credits

     1,517,924   

Inventories

     7,206,290   

Intangible assets

     7,641,865   

Loans, borrowings

     (3,782,919

Debentures

     (2,856,304

Leases

     (1,857,947

Advances on real estate credits

     (340,255

Trade payables

     (915,213

Leases and concessions

     (1,974,280

Provision for legal proceedings

     (458,575

Other liabilities

     (1,619,106

Deferred tax liabilities

     (1,164,510

Non-controlling interests

     (231,681
  

 

 

 

Total identifiable net assets acquired

     2,737,372   
  

 

 

 

During the measurement period new information about facts and circumstances that existed at the acquisition date were identified and the assets and liabilities were adjusted on completion of the acquisition.

 

18


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

5 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:

 

19


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

     July 1, 2016 to September 30, 2016     Additional
information
 
     Raízen
Energia
    Raízen
Combustíveis
    COMGÁS     Radar      Lubricants     Logistics     Cosan
Corporate
    Desconsolidated
effects IFRS 11
    Segment
eliminations /
adjustments
    Total
consolidated
    Cosan
Energia
    Cosan
Logística
 

Statement of income or loss:

                         

Net sales

     3,148,411        17,380,867        1,379,129        —           463,582        1,437,783        48        (20,529,278     (7,739     3,272,803        1,842,760        1,437,783   

Domestic market

     1,274,667        17,380,867        1,379,129        —           355,192        1,346,120        48        (18,655,534     (7,739     3,072,750        1,734,370        1,346,120   

External market

     1,873,744        —          —          —           108,390        91,663        —          (1,873,744     —          200,053        108,390        91,663   

Cost of sales

     (2,480,327     (16,425,140     (763,700     —           (339,903     (939,011     (1,131     18,905,467        7,739        (2,036,006     (1,104,735     (939,010

Gross profit

     668,084        955,727        615,429        —           123,679        498,772        (1,083     (1,623,811     —          1,236,797        738,025        498,773   

Selling expenses

     (199,486     (308,615     (170,632     —           (92,089     (2,829     (14     508,101        —          (265,564     (262,735     —     

General and administrative expenses

     (127,330     (103,440     (84,632     —           (17,742     (87,337     (41,485     230,770        —          (231,196     (141,081     (90,167

Other income (expense), net

     (20,404     412,126        726        —           182        4,763        (22,573     (391,722     —          (16,902     (21,665     4,763   

Financial results

     70,315        (146,529     (55,670     —           (15,563     (423,959     (254,654     76,214        (18,541     (768,387     (303,503     (423,959

Financial expense

     (223,405     (152,843     (190,177     —           (16,161     (501,198     (414,235     376,248        (18,541     (1,140,312     (590,371     (501,198

Financial income

     172,270        63,215        134,545        —           1,157        76,981        50,725        (235,485     —          263,408        186,352        76,981   

Foreign exchange losses, net

     2,706        (45,351     (12,528     —           1,219        (2,914     (33,466     42,645        —          (47,689     (52,518     (2,914

Derivatives

     118,744        (11,550     12,490        —           (1,778     3,172        142,322        (107,194     —          156,206        153,034        3,172   

Equity in earnings of associates

     (10,305     (2,830     —          —           (1,553     2,628        310,316        13,135        (302,998     8,393        6,276        2,628   

Equity in earnings of joint ventures

     —          —          —          —           —          —          404,245        —          —          404,245        404,246        —     

Income tax expense benefit

     (105,808     (258,783     (109,356     —           (92     (51,174     84,372        364,591        6,304        (69,946     (25,076     (51,174
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit from continuing operations

     275,066        547,656        195,866        —           (3,177     (59,136     479,124        (822,722     (315,237     297,440        394,488        (59,136

Profit from discontinued operation, net of tax

     —          —          —          18,312         —          —          6,584        —          (6,584     18,312        18,311        —     

Total net income attributable to:

                         

Owners of the Company

     274,978        534,943        122,307        6,582         (3,177     (17,764     485,708        (809,921     (435,463     158,193        327,512        (17,764

Non-controlling interests

     88        12,713        73,559        11,730         —          (41,372     —          (12,801     113,642        157,559        85,287        (41,372
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     275,066        547,656        195,866        18,312         (3,177     (59,136     485,708        (822,722     (321,821     315,752        412,799        (59,136

Other selected data:

                         

Depreciation and amortization

     477,902        145,552        134,064        —           23,748        226,384        3,423        (623,454     —          387,619        161,235        226,384   

EBITDA

     788,461        1,098,520        494,956        —           36,226        642,381        652,829        (1,886,981     (303,000     1,523,392        884,302        642,381   

Additions to PP&E, intangible and biological assets

     354,163        191,632        89,291        —           11,188        440,858        5,956        (545,795     —          547,293        106,435        440,858   

Reconciliation of EBITDA:

                         

Profit (loss) for the period

     275,066        547,656        195,866        —           (3,177     (59,136     479,124        (822,722     (315,237     297,440        394,488        (59,136

Income tax and social contribution

     105,808        258,783        109,356        —           92        51,174        (84,372     (364,591     (6,304     69,946        25,076        51,174   

Financial result, net

     (70,315     146,529        55,670        —           15,563        423,959        254,654        (76,214     18,541        768,387        303,503        423,959   

Depreciation and amortization

     477,902        145,552        134,064        —           23,748        226,384        3,423        (623,454     —          387,619        161,235        226,384   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     788,461        1,098,520        494,956        —           36,226        642,381        652,829        (1,886,981     (303,000     1,523,392        884,302        642,381   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

20


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

     January 1, 2016 to September 30, 2016     Additional information  
     Raízen
Energia
    Raízen
Combustíveis
    COMGÁS     Radar      Lubricants     Logistics     Cosan
Corporate
    Desconsolidated
effects IFRS 11
    Segment
eliminations /
adjustments
    Total
consolidated
    Cosan
Energia
    Cosan
Logística
 

Statement of income or loss:

                         

Net sales

     9,657,588        50,252,193        4,333,163        —           1,431,697        3,999,921        425        (59,909,781     (32,947     9,732,259        5,765,283        3,999,922   

Domestic market

     3,955,267        50,252,193        4,333,163        —           1,096,072        3,804,610        425        (54,207,460     (32,947     9,201,323        5,429,658        3,804,611   

External market

     5,702,321        —          —          —           335,625        195,311        —          (5,702,321     —          530,936        335,625        195,311   

Cost of sales

     (7,364,106     (47,690,919     (2,321,714     —           (1,081,183     (2,717,621     (10,226     55,055,025        32,947        (6,097,797     (3,413,122     (2,717,621

Gross profit

     2,293,482        2,561,274        2,011,449        —           350,514        1,282,300        (9,801     (4,854,756     —          3,634,462        2,352,161        1,282,301   

Selling expenses

     (568,201     (965,232     (485,102     —           (271,431     (3,553     (114     1,533,433        —          (760,200     (756,647     —     

General and administrative expenses

     (405,951     (324,245     (242,585     —           (53,482     (260,066     (173,125     730,196        —          (729,258     (417,730     (263,620

Other income (expense), net

     16,544        610,196        (1,930     —           2,037        (3,033     (80,293     (626,740     —          (83,219     (80,187     (3,033

Financial results

     486,213        (426,235     (197,677     —           (59,827     (1,257,677     (909,688     (59,978     94,939        (2,329,930     (1,010,636     (1,257,677

Financial expense

     (697,432     (208,240     (564,425     —           (38,841     (1,448,311     (902,869     905,672        94,939        (2,859,507     (1,427,691     (1,448,311

Financial income

     500,169        177,425        366,171        —           2,967        212,632        253,206        (677,594     —          834,976        621,960        212,632   

Foreign exchange losses, net

     (57,513     736,752        230,033        —           46,567        79,144        656,122        (679,239     —          1,011,866        1,018,309        79,144   

Derivatives

     740,989        (1,132,172     (229,456     —           (70,520     (101,142     (916,147     391,183        —          (1,317,265     (1,223,214     (101,142

Equity in earnings of associates

     (59,080     (310     —          —           (4,575     8,751        926,980        59,390        (927,921     3,235        (5,513     8,751   

Equity in earnings of joint ventures

     —          —          —          —           —          —          1,098,183        —          —          1,098,183        1,098,183        —     

Income tax expense benefit

     (553,720     (443,006     (377,118     —           4,553        (43,871     296,737        996,726        (32,279     (151,978     (75,827     (43,871
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit from continuing operations

     1,209,285        1,012,442        707,037        —           (32,212     (277,149     1,148,881        (2,221,727     (865,262     681,295        1,103,803        (277,149

Profit from discontinued operation, net of tax

     —          —          —          58,860         —          —          24,788        —          (24,788     58,860        58,860        —     

Total net income attributable to:

                         

Owners of the Company

     1,209,197        977,481        436,250        24,788         (32,212     (76,814     1,173,669        (2,186,678     (1,209,816     315,865        857,804        (76,814

Non-controlling interests

     88        34,961        270,787        34,072         —          (200,335     —          (35,049     319,766        424,290        304,859        (200,335
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     1,209,285        1,012,442        707,037        58,860         (32,212     (277,149     1,173,669        (2,221,727     (890,050     740,155        1,162,663        (277,149

Other selected data:

                         

Depreciation and amortization

     1,662,345        457,824        374,871        —           66,334        651,817        10,914        (2,120,169     —          1,103,936        452,119        651,817   

EBITDA

     2,939,137        2,339,507        1,656,703        —           89,396        1,676,216        1,772,746        (5,278,644     (927,922     4,267,139        2,642,385        1,676,216   

Additions to PP&E, intangible and biological assets

     1,522,527        596,643        292,751        —           29,876        1,264,952        8,596        (2,119,170     —          1,596,175        331,223        1,264,952   

Reconciliation of EBITDA:

                         

Profit (loss) for the period

     1,209,285        1,012,442        707,037        —           (32,212     (277,149     1,148,881        (2,221,727     (865,262     681,295        1,103,803        (277,149

Income tax and social contribution

     553,720        443,006        377,118        —           (4,553     43,871        (296,737     (996,726     32,279        151,978        75,827        43,871   

Financial result, net

     (486,213     426,235        197,677        —           59,827        1,257,677        909,688        59,978        (94,939     2,329,930        1,010,636        1,257,677   

Depreciation and amortization

     1,662,345        457,824        374,871        —           66,334        651,817        10,914        (2,120,169     —          1,103,936        452,119        651,817   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     2,939,137        2,339,507        1,656,703        —           89,396        1,676,216        1,772,746        (5,278,644     (927,922     4,267,139        2,642,385        1,676,216   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

21


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

     July 1, 2015 to September 30, 2015 (Restated)     Additional
information
 
     Raízen
Energia
    Raízen
Combustíveis
    COMGÁS     Radar      Lubricants     Logistics     Cosan
Corporate
    Desconsolidated
effects IFRS 11
    Segment
eliminations /
adjustments
    Total
consolidated
    Cosan
Energia
    Cosan
Logística
 

Statement of income or loss:

                         

Net sales

     2,637,476        15,638,868        1,743,099        —           484,226        1,357,726        26        (18,276,344     (11,635     3,573,442        2,227,352        1,357,726   

Domestic market

     1,098,525        15,638,868        1,743,099        —           388,613        1,300,020        26        (16,737,393     (11,635     3,420,123        2,131,739        1,300,020   

External market

     1,538,951        —          —          —           95,613        57,706        —          (1,538,951     —          153,319        95,613        57,706   

Cost of sales

     (2,207,305     (14,884,931     (1,241,425     —           (367,111     (921,415     (92     17,092,236        11,635        (2,518,408     (1,608,628     (921,415

Gross profit

     430,171        753,937        501,674        —           117,115        436,311        (66     (1,184,108     —          1,055,034        618,724        436,311   

Selling expenses

     (188,350     (305,979     (156,465     —           (74,595     (2,556     1        494,329        —          (233,615     (231,060     (2,556

General and administrative expenses

     (137,341     (91,255     (78,338     —           (18,482     (96,185     (44,013     228,596        —          (237,018     (135,763     (96,185

Other income (expense), net

     (5,433     88,042        (671     —           385        11,202        (12,150     (82,609     —          (1,234     (12,436     11,202   

Financial results

     (462,881     (94,575     889        —           (13,555     (396,747     (126,130     557,456        —          (535,543     (207,324     (396,747

Financial expense

     (262,380     (45,428     (58,366     —           (1,532     (386,929     (224,319     307,808        4,925        (666,221     (269,904     (386,929

Financial income

     181,857        39,412        105,055        —           1,993        57,482        35,270        (221,269     (4,925     194,875        137,374        57,482   

Foreign exchange losses, net

     (622,213     (169,696     349,574        —           (17,435     (139,033     (464,291     791,909        —          (271,185     (180,793     (139,033

Derivatives

     239,855        81,137        (395,374     —           3,419        71,733        527,210        (320,992     —          206,988        105,999        71,733   

Equity in earnings of associates

     (14,802     3,505        —          —           (2,416     4,074        95,815        11,297        (92,980     4,493        419        4,074   

Equity in earnings of joint ventures

     —          —          —          —           —          —          24,917        —          —          24,917        24,917        —     

Income tax expense benefit

     164,978        (84,041     (94,867     —           (4,484     1,260        84,803        (80,937     —          (13,288     (14,547     1,260   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit from continuing operations

     (213,658     269,634        172,222        —           3,968        (42,641     23,177        (55,976     (92,980     63,746        42,930        (42,641

Profit from discontinued operation, net of tax

     —          —          —          12,857         —          —          5,629        —          (5,629     12,857        12,857        —     

Total net income attributable to:

                         

Owners of the Parent

     (213,658     263,494        106,469        5,630         3,968        (10,601     28,806        (49,836     (88,270     46,002        (17,192     (10,601

Non-controlling interests

     —          6,140        65,753        7,227         —          (32,040     —          (6,140     (10,339     30,601        72,979        (32,040
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (213,658     269,634        172,222        12,857         3,968        (42,641     28,806        (55,976     (98,609     76,603        55,787        (42,641

Other selected data:

                         

Depreciation and amortization

     509,827        144,802        120,865        —           20,140        195,333        1,147        (654,629     —          337,485        142,152        195,333   

EBITDA

     594,072        593,052        387,065        —           42,147        548,179        65,651        (1,187,124     (92,980     950,062        406,953        548,179   

Additions to PP&E, intangible and biological assets

     230,362        208,571        136,639        —           15,222        479,318        6,996        (438,933     —          638,175        159,520        479,318   

Reconciliation of EBITDA:

                         

Profit (loss) for the period

     (213,658     269,634        172,222        —           3,968        (42,641     23,177        (55,976     (92,980     63,746        42,930        (42,641

Income tax and social contribution

     (164,978     84,041        94,867        —           4,484        (1,260     (84,803     80,937        —          13,288        14,547        (1,260

Financial result, net

     462,881        94,575        (889     —           13,555        396,747        126,130        (557,456     —          535,543        207,324        396,747   

Depreciation and amortization

     509,827        144,802        120,865        —           20,140        195,333        1,147        (654,629     —          337,485        142,152        195,333   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     594,072        593,052        387,065        —           42,147        548,179        65,651        (1,187,124     (92,980     950,062        406,953        548,179   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

22


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

     January 1, 2015 to September 30, 2015     Additional information  
     Raízen
Energia
    Raízen
Combustíveis
    COMGÁS     Radar      Lubricants     Logistics     Cosan
Corporate
    Desconsolidated
effects IFRS 11
    Segment
eliminations /
adjustments
    Total
consolidated
    Cosan
Energia
    Cosan
Logística
 

Statement of income or loss:

                         

Net sales

     7,364,398        44,494,263        4,948,174        —           1,288,157        2,783,622        27        (51,858,661     (20,705     8,999,275        6,236,358        2,783,622   

Domestic market

     3,054,921        44,494,263        4,948,174        —           1,032,784        2,652,552        27        (47,549,184     (20,705     8,612,832        5,980,985        2,652,552   

External market

     4,309,477        —          —          —           255,373        131,070        —          (4,309,477     —          386,443        255,373        131,070   

Cost of sales

     (6,369,387     (42,279,521     (3,487,020     —           (969,947     (1,833,762     (93     48,648,908        20,705        (6,270,117     (4,457,060     (1,833,763

Gross profit

     995,011        2,214,742        1,461,154        —           318,210        949,860        (66     (3,209,753     —          2,729,158        1,779,298        949,859   

Selling expenses

     (425,510     (903,002     (461,640     —           (209,779     (2,556     (1     1,328,512        —          (673,976     (671,420     (2,555

General and administrative expenses

     (399,167     (288,757     (238,794     —           (52,014     (205,338     (139,995     687,924        —          (636,141     (405,044     (205,337

Other income (expense), net

     9,324        231,602        (4,540     —           758        50,572        (130,212     (240,926     —          (83,422     (133,994     50,572   

Financial results

     (690,226     (115,901     (131,363     —           (22,551     (743,731     (512,484     806,127        —          (1,410,129     (756,472     (743,730

Financial expense

     (662,354     (131,457     (255,045     —           (23,021     (755,806     (589,003     793,811        12,925        (1,609,950     (828,668     (755,806

Financial income

     482,055        118,641        184,279        —           3,349        111,033        96,486        (600,696     (12,925     382,222        271,117        111,033   

Foreign exchange losses, net

     (1,082,392     (314,386     153,124        —           (11,860     (195,308     (710,873     1,396,778        —          (764,917     (641,767     (195,307

Derivatives

     572,465        211,301        (213,721     —           8,981        96,350        690,906        (783,766     —          582,516        442,846        96,350   

Equity in earnings of associates

     (32,214     10,617        —          —           (9,507     4,254        246,514        21,597        (239,746     1,515        (2,740     4,255   

Equity in earnings of joint ventures

     —          —          —          —           —          —          252,014        —          —          252,014        252,015        —     

Income tax expense benefit

     268,026        (346,139     (226,842     —           (13,507     (50,146     280,718        78,113        —          (9,777     40,369        (50,146
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit from continuing operations

     (274,756     803,162        397,975        —           11,610        2,915        (3,512     (528,406     (239,746     169,242        102,012        2,918   

Profit from discontinued operation, net of tax

     —          —          —          57,561         —          —          20,109        —          (20,109     57,561        57,561        —     

Total net income attributable to:

                         

Owners of the Parent

     (274,756     777,978        243,475        20,110         11,610        7,870        16,597        (503,222     (250,687     48,975        159,573        2,918   

Non-controlling interests

     —          25,184        154,500        37,451         —          (4,955     —          (25,184     (9,168     177,828        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (274,756     803,162        397,975        57,561         11,610        2,915        16,597        (528,406     (259,855     226,803        159,573        2,918   

Other selected data:

                         

Depreciation and amortization

     1,473,871        431,832        360,296        —           56,988        398,870        3,180        (1,905,703     —          819,334        420,464        398,870   

EBITDA

     1,621,315        1,697,034        1,116,476        —           104,656        1,195,662        231,434        (3,318,349     (239,746     2,408,482        1,238,579        1,195,664   

Additions to PP&E, intangible and biological assets

     1,459,134        573,423        382,659        —           31,904        1,073,650        40,115        (2,032,557     —          1,528,328        456,282        1,073,650   

Reconciliation of EBITDA:

                         

Profit (loss) for the period

     (274,756     803,162        397,975        —           11,610        2,915        (3,512     (528,406     (239,746     169,242        102,012        2,918   

Income tax and social contribution

     (268,026     346,139        226,842        —           13,507        50,146        (280,718     (78,113     —          9,777        (40,369     50,146   

Financial result, net

     690,226        115,901        131,363        —           22,551        743,731        512,484        (806,127     —          1,410,129        756,472        743,730   

Depreciation and amortization

     1,473,871        431,832        360,296        —           56,988        398,870        3,180        (1,905,703     —          819,334        420,464        398,870   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     1,621,315        1,697,034        1,116,476        —           104,656        1,195,662        231,434        (3,318,349     (239,746     2,408,482        1,238,579        1,195,664   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

23


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

     September 30, 2016     Additional information  

Statement of financial position:

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

Cash and cash equivalents

     3,224,972        1,103,332        1,691,599        —          103,762        41,804        1,310,799        (4,328,304     —          3,147,964        2,981,145        41,804   

Marketable securities

     —          —          —          —          —          1,385,289        —          —          —          1,385,289        —          1,385,289   

Trade receivables

     646,381        1,937,086        571,381        —          242,533        293,916        2        (2,583,467     —          1,107,832        815,276        293,916   

Derivative financial instruments

     884,431        140,763        486,117        —          —          4,347        734,612        (1,025,194     —          1,225,076        1,220,729        4,347   

Inventories

     2,614,158        1,540,822        138,783        —          256,807        293,443        1,318        (4,154,980     —          690,351        396,908        293,443   

Other financial assets

     686,519        —          —          —          —          —          72,554        (686,519     (72,554     —          72,554        —     

Assets held for sale

     —          —          —          3,067,056        —          —          1,298,428        —          (1,298,428     3,067,056        3,067,056        —     

Other current assets

     2,640,894        1,255,034        105,636        —          53,673        465,942        191,154        (3,895,928     (37,546     778,859        335,388        465,942   

Other non-current assets

     3,461,153        1,106,112        305,804        —          31,397        2,466,869        1,711,283        (4,567,265     (32,962     4,482,391        2,040,402        2,466,869   

Investments in associates

     386,064        —          —          —          24,552        47,062        11,157,787        (386,064     (11,024,408     204,993        8,659,533        47,062   

Investments in joint ventures

     —          —          —          —          —          —          8,501,602        —          —          8,501,602        —          —     

Biological assets

     779,066        —          —          —          —          —          —          (779,066     —          —          —          —     

Investment property

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

Property, plant and equipment

     10,595,505        2,367,913        —          —          240,696        10,301,655        152,792        (12,963,418     —          10,695,143        393,488        10,301,655   

Intangible assets and goodwill

     3,232,651        4,522,887        8,539,044        —          777,129        7,816,161        7,655        (7,755,538     —          17,139,989        9,323,827        7,816,161   

Loans, borrowings and debentures

     (11,680,546     (1,045,930     (3,566,102     —          (464,007     (8,052,512     (5,690,790     12,726,476        —          (17,773,411     (9,015,476     (8,052,513

Derivative financial instruments

     (916,308     (632,194     —          —          (40,283     (18,541     (569,824     1,548,502        —          (628,648     (610,107     (18,541

Trade payables

     (1,309,317     (772,445     (1,172,843     —          (208,839     (528,759     (5,213     2,081,762        —          (1,915,654     (1,386,895     (527,942

Real estate credit certificates

     —          —          —          —          —          (220,576     —          —          —          (220,576     —          (220,576

Employee benefits payable

     (345,998     (68,387     (56,352     —          (21,384     (140,337     (17,512     414,385        —          (235,585     (95,249     (140,337

Preferred shareholders payable in subsidiaries

     —          —          —          —          —          —          (2,023,988     —          —          (2,023,988     (2,045,339     —     

Liabilities held for sale

     —          —          —          (155,219     —          (7,920     (80,173     —          —          (243,312     (235,392     —     

Lease

     —          —          —          —          —          (1,534,118     —          —            (1,534,118     —          (1,534,118

Other current liabilities

     (1,481,859     (1,508,177     (210,569     —          (150,370     (678,362     (194,970     2,990,036        45,624        (1,188,647     (533,256     (686,283

Other non-current liabilities

     (1,341,141     (4,766,264     (1,461,123     —          (147,316     (5,821,941     (1,365,973     6,107,405        109,802        (8,686,551     (2,949,527     (5,822,758
                        

Total assets (net of liabilities) allocated by segment

     12,076,625        5,180,552        5,371,375        2,911,837        698,350        6,113,422        15,191,543        (17,257,177     (12,310,472     17,976,055        12,435,065        6,113,420   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

     29,151,794        13,973,949        11,838,364        3,067,056        1,730,549        23,116,488        25,139,986        (43,125,743     (12,465,898     52,426,545        29,306,306        23,116,488   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity attributable to owners of the Company

     12,077,587        4,993,284        5,371,375        2,911,837        698,350        1,661,351        15,191,543        (17,070,871     (19,592,108     6,242,348        8,927,843        1,661,349   

Non-controlling interests

     (962     187,268        —          —          —          4,452,071        —          (186,306     7,281,636        11,733,707        3,507,222        4,452,071   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     12,076,625        5,180,552        5,371,375        2,911,837        698,350        6,113,422        15,191,543        (17,257,177     (12,310,472     17,976,055        12,435,065        6,113,420   

 

24


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

     December 31, 2015 (Restated)     Additional information  

Statement of financial position:

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

Cash and cash equivalents

     2,995,495        885,880        1,967,643        1,016        96,907        246,849        1,193,409        (3,881,375     —          3,505,824        3,129,530        246,849   

Marketable securities

     —          —          —          241,430        —          508,268        —          —          —          749,698        241,430        508,268   

Trade receivables

     719,092        2,058,601        540,132        38,510        220,417        165,671        248        (2,777,693     —          964,978        799,308        165,671   

Derivative financial instruments

     1,465,816        255,665        665,032        —          12,363        99,863        1,653,038        (1,721,481     —          2,430,296        2,292,859        99,863   

Inventories

     2,371,987        1,287,946        134,347        —          293,916        225,784        2,854        (3,659,933     —          656,901        431,117        225,784   

Other current assets

     1,579,568        1,029,510        132,960        120,615        51,926        364,168        277,393        (2,609,078     (66,604     880,458        503,502        364,168   

Other non-current assets

     3,425,968        921,891        279,091        51        (135,853     2,824,311        1,937,123        (4,347,859     (9,717     4,895,006        2,070,687        2,824,311   

Investment in associates

     225,670        248,456        —          —          8,453        44,241        11,971,024        (474,126     (11,839,342     184,376        140,134        44,241   

Investment in joint ventures

     —          —          —          —          —          —          8,237,190        —          —          8,237,190        8,237,190        —     

Biological assets

     678,564        —          —          —          —          —          —          (678,564     —          —          —          —     

Investment property

     —          —          —          2,595,035        —          —          —          —          —          2,595,035        2,595,035        —     

Property, plant and equipment

     11,027,461        2,409,555        —          2,029        243,080        9,404,087        156,691        (13,437,016     —          9,805,887        401,800        9,404,087   

Intangible assets and goodwill

     3,261,623        4,414,352        8,620,436        1,669        818,362        7,862,420        6,802        (7,675,975     —          17,309,689        9,447,269        7,862,420   

Loans, borrowings and debenture

     (11,549,211     (3,226,449     (3,823,067     —          (512,758     (8,585,175     (5,908,203     14,775,660        —          (18,829,203     (9,755,703     (8,585,175

Trade payables

     (676,321     (67,902     —          —          (291     (1,780     (740,427     744,223        —          (742,498     (740,718     (1,780

Derivative financial instruments

     (1,126,540     (937,177     (1,302,397     (2,511     (235,663     (420,189     (4,252     2,063,717        —          (1,965,012     (1,544,822     (420,189

Employee benefits payable

     (315,704     (83,214     (65,522     (5,684     (15,061     (149,871     (20,141     398,918        —          (256,279     (106,407     (149,871

Other current liabilities

     (920,298     (968,904     (103,331     (35,464     (135,945     (1,477,920     (237,919     1,889,202        64,528        (1,926,051     (463,015     (1,477,920

Other non-current liabilities

     (1,364,086     (3,129,560     (1,180,987     (104,403     (209,245     (7,094,274     (3,754,009     4,493,646        108,965        (12,233,953     (5,236,850     (7,094,274
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets (net of liabilities) allocated by segment

     11,799,084        5,098,650        5,864,337        2,852,293        500,608        4,016,453        14,770,821        (16,897,734     (11,742,170     16,262,342        12,442,346        4,016,453   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

     27,751,244        13,511,856        12,339,641        3,000,355        1,609,571        21,745,662        25,435,772        (41,263,100     (11,915,663     52,215,338        30,289,861        21,745,662   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity attributable to owners of the Company

     11,800,047        4,926,655        5,864,337        2,852,293        500,608        1,113,277        14,770,821        (16,726,702     (19,142,086     5,959,250        8,753,858        1,113,277   

Non-controlling interests

     (963     171,995        —          —          —          2,903,176        —          (171,032     7,399,916        10,303,092        3,688,488        2,903,176   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     11,799,084        5,098,650        5,864,337        2,852,293        500,608        4,016,453        14,770,821        (16,897,734     (11,742,170     16,262,342        12,442,346        4,016,453   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

25


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

Net sales by segment:

 

     July 1, 2016 to
September 30,
2016
    January 1,
2016 to
September 30,
2016
    July 1, 2015 to
September 30,
2015
    January 1,
2015 to
September 30,
2015
 

Raízen Energia

        

Ethanol

     1,400,772        4,600,024        1,128,511        3,695,498   

Sugar

     1,443,030        4,404,639        1,200,640        3,073,937   

Cogeneration

     206,557        401,876        203,002        387,740   

Other

     98,052        251,049        105,323        207,223   
  

 

 

   

 

 

   

 

 

   

 

 

 
     3,148,411        9,657,588        2,637,476        7,364,398   

Raízen Combustíveis

        

Fuels

     17,380,867        50,252,193        15,638,868        44,494,263   
  

 

 

   

 

 

   

 

 

   

 

 

 
     17,380,867        50,252,193        15,638,868        44,494,263   

COMGÁS

        

Industrial

     865,824        2,868,654        1,098,456        3,175,412   

Residential

     237,425        590,679        202,404        504,608   

Thermal generation

     6,713        68,307        129,043        379,188   

Cogeneration

     51,505        163,414        64,982        203,082   

Automotive

     53,130        151,107        50,262        145,313   

Commercial

     78,325        224,626        77,706        211,108   

Construction revenue

     77,582        231,869        109,959        303,683   

Other

     8,625        34,507        10,287        25,780   
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,379,129        4,333,163        1,743,099        4,948,174   

Lubricants

        

Lubricants

     404,882        1,256,067        403,214        1,105,607   

Basic oil

     54,725        163,558        76,870        171,028   

Other

     3,975        12,072        4,142        11,522   
  

 

 

   

 

 

   

 

 

   

 

 

 
     463,582        1,431,697        484,226        1,288,157   

Cosan Corporate

        

Other

     48        425        26        27   
  

 

 

   

 

 

   

 

 

   

 

 

 
     48        425        26        27   

IFRS 11—Desconsolidated of adjustments/eliminations joint ventures and eliminations

     (20,537,017     (59,942,728     (18,287,979     (51,879,366
  

 

 

   

 

 

   

 

 

   

 

 

 

Cosan Energia

     1,835,020        5,732,338        2,215,716        6,215,653   
  

 

 

   

 

 

   

 

 

   

 

 

 

Logistics

        

North operations (i)

     1,051,377        2,945,356        972,369        1,995,330   

South operations (i)

     322,391        849,719        317,885        638,036   

Container operations (i)

     64,015        204,846        67,472        150,256   
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,437,783        3,999,921        1,357,726        2,783,622   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     3,272,803        9,732,259        3,573,442        8,999,275   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(i) Segment created following the ALL Acquisition, which was completed on April 1, 2015

 

26


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

6 Cash and cash equivalents

 

     September 30,
2016
     December 31,
2015
 

Cash and bank deposits

     29,388         305,510   

Savings account

     595,378         28,278   

Financial investments

     2,523,198         3,172,036   
  

 

 

    

 

 

 
     3,147,964         3,505,824   
  

 

 

    

 

 

 

 

(i) The balances of savings account that, at December 31, 2015, were presented as financial investments, were reallocated for a better presentation of these financial information.

Financial investments are composed as follows:

 

     September 30,
2016
     December 31,
2015
 

Investment fund

     

Repurchase agreements

     1,783,221         1,252,229   

Bank certificate of deposits—CDB

     219,896         792,279   

Other

     —           171,641   
  

 

 

    

 

 

 
     2,003,117         2,216,149   

Bank investments

     

Repurchase agreements

     61,109         407,971   

Bank certificate of deposits—CDB

     245,968         542,658   

Other

     213,004         5,258   
  

 

 

    

 

 

 
     520,081         955,887   
  

 

 

    

 

 

 
     2,523,198         3,172,036   
  

 

 

    

 

 

 

For purposes of the statement of cash flows, cash and cash equivalents comprises the following balances:

 

     September 30,
2016
     December 31,
2015
 

Cash and bank accounts

     29,388         305,510   

Savings account

     595,378         28,278   

Cash and cash equivalents related to discontinued operation

     9,933         —     

Financial Investments

     2,523,198         3,172,036   
  

 

 

    

 

 

 
     3,157,897         3,505,824   
  

 

 

    

 

 

 

 

27


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

7 Marketable securities

 

     September 30,
2016
     December 31,
2015
 

Government security (i)

     165         334,167   

Bank certificate of deposits—CDB (ii)

     1,385,124         271,323   
  

 

 

    

 

 

 
     1,385,289         605,490   
  

 

 

    

 

 

 

 

(i) Refers to purchases of assets with repurchase agreements at a rate previously established by the parties, usually with fixed period of 90 days or less or for which there are no penalties or other restrictions for early redemption.
(ii) Refers mainly to Bank Deposit Certificates—CDBs, issued by Brazilian financial institutions with original maturities of 90 days or less or for which there are no penalties or other restrictions for early redemption.

 

8 Trade receivables

 

     September 30,
2016
    December 31,
2015
 

Domestic – Brazilian Reais

     1,154,484        999,007   

Export – Foreign currency

     29,451        29,402   

Allowance for doubtful accounts

     (76,103     (63,431
  

 

 

   

 

 

 
     1,107,832        964,978   

Current

     1,047,026        904,245   
  

 

 

   

 

 

 

Non-current

     60,806        60,733   
  

 

 

   

 

 

 

 

9 Other current tax receivables

 

     September 30,
2016
     December 31,
2015
 

ICMS—State VAT

     595,816         597,023   

Credit installment—PAES

     —           33,245   

COFINS—Revenue tax

     230,374         228,393   

PIS—Revenue tax

     61,458         69,098   

Other

     16,340         17,682   
  

 

 

    

 

 

 
     903,988         945,441   

Current

     212,293         311,892   
  

 

 

    

 

 

 

Non-Current

     691,695         633,549   
  

 

 

    

 

 

 

 

28


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

10 Related parties

 

a) Receivables from and payables to related parties:

 

     September 30,
2016
     December 31,
2015
 

Current Asset

     

Commercial operation

     

Raízen Energia S.A.

     43,830         47,591   

Aguassanta Participações S.A.

     6,340         6,371   

Raízen Combustíveis S.A.

     4,500         3,052   

Other

     —           4,085   
  

 

 

    

 

 

 
     54,670         61,099   

Corporate operation / Agreements

     

Raízen Energia S.A.

     9,672         13,028   

Financial operations

     

Raízen Combustíveis S.A.

     —           1,102   
  

 

 

    

 

 

 
     64,342         75,229   
  

 

 

    

 

 

 

Non-current assets

     

Receivables under the framework agreement

     

Janus Brasil Participações S.A

     24,467         20,875   

Raízen Energia S.A.

     114,097         89,763   
  

 

 

    

 

 

 
     138,564         110,638   

Financial operations

     

Novvi Limited Liability Company

     —           17,121   

Other

     —           8   
  

 

 

    

 

 

 
     —           17,129   

Corporate operation

     

Raízen Energia S.A.

     —           23,029   

Rezende Barbosa

     38,994         70,365   

Other

     1,434         184   
  

 

 

    

 

 

 
     178,992         221,345   
  

 

 

    

 

 

 

 

     September 30,
2016
     December 31,
2015
 

Current liabilities

     

Corporate operations

     

Raízen Energia S.A.

     135,939         46,582   

Raízen Combustíveis S.A.

     95,057         71,035   
  

 

 

    

 

 

 
     230,996         117,617   

Corporate operations / Agreements

     

Raízen Energia S.A.

     —           78,653   

Raízen Combustíveis S.A.

     —           7,810   
  

 

 

    

 

 

 
     —           86,463   
  

 

 

    

 

 

 
     230,996         204,080   
  

 

 

    

 

 

 

 

29


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

b) Related party transactions:

 

     July 1, 2016 to
September 30,
2016
    January 1,
2016 to
September 30,
2016
    July 1, 2015 to
September 30,
2015 (Restated)
    January 1,
2015 to
September 30,
2015 (Restated)
 

Sales of goods and services

        

Raízen Combustíveis S.A.

     38,007        100,219        31,931        66,788   

Raízen Energia S.A.

     113,211        328,531        105,634        243,972   
  

 

 

   

 

 

   

 

 

   

 

 

 
     151,218        428,750        137,565        310,760   

Purchase of goods / Inputs

        

Raízen Energia S.A.

     (37     (103     (1,563     (1,633

Raízen Combustíveis S.A.

     (235,843     (662,894     (200,689     (202,453

Other

     (42     (312     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 
     (235,922     (663,309     (202,252     (204,086

Discontinued operation

        

Raízen Energia S.A.

     19,179        50,664        14,352        43,641   
  

 

 

   

 

 

   

 

 

   

 

 

 
     19,179        50,664        14,352        43,641   

Shared income (expense)

        

Aguassanta Participações S.A.

     105        276        114        331   

Raízen Energia S.A.

     (20,299     (54,144     (6,641     (14,878
  

 

 

   

 

 

   

 

 

   

 

 

 
     (20,194     (53,868     (6,527     (14,547

Financial result

        

Raízen Energia S.A.

     501        1,495        680        1,910   

Other

     (51     (124     (161     (356
  

 

 

   

 

 

   

 

 

   

 

 

 
     450        1,371        519        1,554   

 

c) Officers’ and directors’ compensation

 

     July 1, 2016 to
September 30,
2016
     January 1,
2016 to
September 30,
2016
     July 1, 2015 to
September 30,
2015 (Restated)
     January 1,
2015 to
September 30,
2015 (Restated)
 

Regular compensation

     14,570         72,858         7,435         28,305   

Stock option expense

     2,947         8,843         2,930         8,789   

Bonuses and other variable compensation

     4,693         38,205         83         33,143   
  

 

 

    

 

 

    

 

 

    

 

 

 
     22,210         119,906         10,448         70,237   

 

30


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

11 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.
    Other
investments
    Total  

Shares issued by the associate

     65,957,282        200,002        16,166,927        —       

Shares held by Cosan

     33,638,214        100,001        31,699,465        —       

Cosan ownership interest

     51.00%        33.33%        51.00%        —       
  

 

 

   

 

 

   

 

 

   

 

 

   

Equity in earnings (losses) of associates at September 30, 2015

     8,235        (9,497     588        2,189        1,515   

At December 31, 2015

     99,638        6,783        23,713        54,242        184,376   

Equity in earnings (losses) of associates

     (160     (4,575     4,808        3,162        3,235   

Capital increase

     —          20,972        3,592        —          24,564   

Dividends

     (1,508     —          (689     (5,928     (8,125

Other

     (492     —          (90     1,525        943   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At September 30, 2016

     97,478        23,180        31,334        53,001        204,993   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

31


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

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 Logística
Operadora
Multimodal S.A.
    Logispot
Armazéns
Agrícolas S.A.
    Radar
Propriedades
Agrícolas S.A.
    Radar II
Propriedades
Agrícolas S.A.
     Elimination of
participation
Radar II in
Radar
    Total  

Shares issued by the associate

     407,214,353        365,100,567        127,313,301        1,339,015,898        2,040,816        21,148,989        830,690,258         —       

Shares held by non-controlling shareholders

     153,511,030        100,327,292        47,549,252        959,137,088        1,000,000        17,147,822        290,710,861         —       

Non-controlling interest

     37.70%        27.48%        37.35%        71.63%        49.00%        81.08%        35.00%         —       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

Equity in earnings (losses) of associates at September 30, 2015 (Restated)

     (12,142     154,500        2,973        (4,331     (624     (9,204     46,656         —          177,828   

At December 31, 2015

     3,700,096        46,043        2,109,567        2,866,244        36,835        1,728,749        349,022         (498,850     10,337,706   

Effect of changes to IAS 41 (Note 2)

     (34,614     —          —          —          —          —          —           —          (34,614

At December 31, 2015 (Restated)

     3,665,482        46,043        2,109,567        2,866,244        36,835        1,728,749        349,022         (498,850     10,303,092   

Equity in earnings (losses) of associates

     345,277        (25,510     270,787        (199,458     (877     30,769        9,455         (6,153     424,290   

Other comprehensive income (losses)

     (38,744     399        —          4,470        —          503        38         (111     (33,445

Dividends

     (216,701     —          (464,007     —          —          —          —           —          (680,708

Capital increase

     —          139,556        —          1,744,856        —          —          —           —          1,884,412   

Other

     (70,812     (70,575     (22,547     —          —          —          —           —          (163,934
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

At September 30, 2016

     3,684,502        89,913        1,893,800        4,416,112        35,958        1,760,021        358,515         (505,114     11,733,707   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

32


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

12 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%        50%     
  

 

 

   

 

 

   

Equity in earnings of joint ventures at September 30, 2015 (Restated)

     388,395        (136,381     252,014   

At December 31, 2015

     3,204,834        5,124,686        8,329,520   

Effect of changes to IAS 41 (Note 2)

     —          (92,330     (92,330

At December 31, 2015 (Restated)

     3,204,834        5,032,356        8,237,190   

Equity in earnings of joint ventures

     488,223        609,960        1,098,183   

Other comprehensive losses

     20,646        (181,075     (160,429

Interest on capital

     (63,500     —          (63,500

Dividends

     (412,060     (197,782     (609,842
  

 

 

   

 

 

   

 

 

 

At September 30, 2016

     3,238,143        5,263,459        8,501,602   
  

 

 

   

 

 

   

 

 

 

The statement of financial position and statement of profit or loss of the joint ventures are disclosed in Note 5 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 Raízen access to a credit line (stand-by facility) in the amount of US$500 million, which was unused at September 30, 2016.

 

13 Disposal group held for sale

On September 30, 2016, Company signed a Share Purchase Agreement with Mansilla Participações Ltda. (vehicle from TIAA—Teachers Insurance and Annuity Association of America investment fund), also a shareholder of Radar and Radar II, committing to sell part of its stake in Radar for a net amount of R$1.064.506. Cosan will maintain a stake in Radar’s common shares due to its expertise in the sector.

As described in the Purchase and Sale Agreement, the sale of Radar’s share only will be realized after the approval of CADE (Administrative Council for Economic Defense), which occurred on October 18, 2016.

 

33


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

(a) Impairment losses relating to the disposal group

The asset available for sale’s measurement should be done at the lower value between carrying amount and fair value, however, the book balances at Consolidated level of Radar I e Radar II are substantially comprised of investment properties, assets held for sale, other financial assets, securities and cash and cash equivalents, whose measurement rules are set forth in IFRS 5, so no adjustment should be made.

 

(b) Assets and liabilities of disposal group held for sale

On September 30, 2016, the group of assets and liabilities held for sale comprised the following assets and liabilities:

 

     September 30, 2016  

Assets

  

Cash and cash equivalents

     9,933   

Investment securities

     146,749   

Other current assets

     20,906   

Assets held for sale

     122,086   

Other financial assets

     150,150   

Other current assets

     19,293   

Investment properties

     2,594,462   

Property and equipment

     1,655   

Intangible assets

     1,822   
  

 

 

 

Assets held for sales

     3,067,056   

Liabilities

  

Trade payables

     507   

Salaries payable

     6,096   

Income tax payables

     15,407   

Dividends and interest on capital payable

     14,810   

Payables to related parties

     6,335   

Other current liabilities

     3,589   

Deferred tax liabilities

     188,648   
  

 

 

 

Liabilities held for sales

     235,392   
  

 

 

 

Net assets held for sales

     3,302,448   
  

 

 

 

Other comprehensive income

  

Change in fair value of available for sale securities

     5,804   

 

34


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

(c) Net income from discontinued operations

 

     July 1, 2016 to
September 30,
2016
    January 1,
2016 to
September 30,
2016
    July 1, 2015 to
September 30,
2015
    January 1,
2015 to
September 30,
2015
 

Net sales

     25,315        72,243        31,886        80,420   

Cost of sales

     —          —          (10,713     (17,982
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     25,315        72,243        21,173        62,438   
  

 

 

   

 

 

   

 

 

   

 

 

 

General and administrative expenses

     (8,559     (23,249     (8,030     (22,225

Other expense, net

     1,159        9,825        23        20,806   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     (7,400     (13,424     (8,007     (1,419
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before equity in earning

and financial results

     17,915        58,819        13,166        61,019   
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial results

     5,074        13,201        3,199        6,870   

Profit before taxes

     22,989        72,020        16,365        67,889   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expenses

     (4,677     (13,160     (3,508     (10,328
  

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the period

     18,312        58,860        12,857        57,561   
  

 

 

   

 

 

   

 

 

   

 

 

 

Owners of the Company

     4,112        15,491        3,519        12,570   

Non-controlling interests

     14,200        43,369        9,338        44,991   
  

 

 

   

 

 

   

 

 

   

 

 

 
     18,312        58,860        12,857        57,561   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(d) Cash flows generated (used in) discontinued operations

 

     January 1,
2016 to
September 30,
2016
    January 1,
2015 to
September 30,
2015
 

Net cash generated by operating activities

     14,309        13,279   

Net cash used in investing activities

     (5,393     (18,111
  

 

 

   

 

 

 

Net cash generated by (used in) discontinued operations

     8,916        (4,832
  

 

 

   

 

 

 

The income statement for the period and comparative cash flow is being restated to present discontinued operations separately from continuing operations.

 

35


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

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, 2015

     859,957        663,223        4,235,037        3,568,597        824,034        467,090        10,617,938   

Additions

     —          6,814        18,309        42,386        1,422,379        1,342        1,491,230   

Disposals

     —          (1,339     (823     (7,409     (202     (24,156     (33,929

Transfers

     107,549        67,403        738,620        171,576        (1,043,798     (43,067     (1,717

Discontinued operation

     (598     (143     —          —          (603     (1,005     (2,349
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At September 30, 2016

     966,908        735,958        4,991,143        3,775,150        1,201,810        400,204        12,071,173   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amortization

              

At December 31, 2015

     (118,056     (218,925     (248,686     (209,308     —          (17,076     (812,051

Additions

     (34,469     (55,139     (201,271     (225,653     —          (56,562     (573,094

Disposals

     —          224        440        3,048        —          15,398        19,110   

Transfers

     5,061        852        3,052        (7,342     —          (12,312     (10,689

Discontinued operation

     136        96        —          —          —          462        694   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At September 30, 2016

     (147,328     (272,892     (446,465     (439,255     —          (70,090     (1,376,030
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At December 31, 2015

     741,901        444,298        3,986,351        3,359,289        824,034        450,014        9,805,887   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At September 30, 2016

     819,580        463,066        4,544,678        3,335,895        1,201,810        330,114        10,695,143   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capitalization of borrowing costs

Capitalized borrowing costs for the period ended September 30, 2016 amounted to R$2.227 (R$7.031 for the period ended September 30, 2015).

 

36


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

15 Intangible assets and goodwill

 

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

Cost:

              

At December 31, 2015

     713,291        16,664,047        432,529        252,474        940,470        404,013        19,406,824   

Additions

     —          247,257        26,552        —          55,903        6,791        336,503   

Disposals

     —          (16,777     —          —          (10,391     (272     (27,440

Transfers

     —          (2,147     (26,552     —          106        17,503        (11,090

Business combination

     —          57,217        —          —          —          —          57,217   

Discontinued operation

     —          —          —          —          —          (2,396     (2,396
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At September 30, 2016

     713,291        16,949,597        432,529        252,474        986,088        425,639        19,759,618   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amortization

              

At December 31, 2015

     —          (1,011,806     (193,818     (159,789     (575,411     (156,311     (2,097,135

Additions

     (4,270     (349,471     (8,806     (17,120     (113,129     (45,571     (538,367

Disposals

     —          9,821        —          —          5,466        18        15,305   

Transfers

     —          124        —          —          —          (130     (6

Discontinued operation

     —          —          —          —          —          574        574   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At September 30, 2016

     (4,270     (1,351,332     (202,624     (176,909     (683,074     (201,420     (2,619,629
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At December 31, 2015

     713,291        15,652,241        238,711        92,685        365,059        247,702        17,309,689   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At September 30, 2016

     709,021        15,598,265        229,905        75,565        303,014        224,219        17,139,989   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capitalization of borrowing costs

Capitalized borrowing costs for the period ended September 30, 2016, amounted to R$13,026 (R$13,766 for the period ended September 30, 2015). The weighted average interest rate used to capitalize borrowing costs on the balance of construction in progress, was 12.55% p.a. for the period ended September 30, 2016 (11.26% p.a. for the period ended September 30,2015).

 

37


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

Intangible assets (excluding goodwill)

   Annual rate of
amortization—%
     September 30,
2016
     December 31,
2015
 

Gas distribution concession—COMGÁS (i)

     Concession term         8,216,389         8,237,379   

Concession rights—Rumo (ii)

     Concession term         7,381,877         7,414,862   
     

 

 

    

 

 

 
        15,598,266         15,652,241   

Operating license for port terminal (iii)

     4.00         229,905         238,711   
        —           —     

Trademarks

        

Mobil

     10.00         51,361         68,481   

Comma

     —           24,204         24,204   
     

 

 

    

 

 

 
        75,565         92,685   

Relationship with customers:

        —        

Comgás

     3.00         260,131         313,694   

Lubricants

     6.00         42,883         51,365   
     

 

 

    

 

 

 
        303,014         365,059   

Other

        —        

Software licenses

     20.00         128,324         126,469   

Other

        95,895         121,233   
        224,219         247,702   
     

 

 

    

 

 

 

Total

        16,430,969         16,596,398   
     

 

 

    

 

 

 

 

(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 ALL 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 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 September 30, 2016, no impairment indicators were identified that would trigger the need for an impairment test.

 

38


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

16 Loans, borrowings and debentures

 

    

Interest

                   

Description

  

Index (i)

   Annual
interest  (ii)
    September 30,
2016
     December 31,
2015
    

Maturity

Loan and borrowings

             

BNDES

   URTJLP      9.33     2,535,451         2,851,793       Jun/2029
   Fixed      5.02     1,160,599         1,016,225       Feb/2025
   TJ462      10.43     688,609         809,660       Oct/2020
   Selic      16.22     320,663         298,258       Oct/2020
   TJLP      10.15     168,096         176,900       Oct/2018
   Selic      14.15     5,586         5,595       Sep/2020
   Fixed      3.94     4,112         4,684       Jan/2024
   IPCA      15.52     4,659         4,152       Nov/2021
   URTJLP      10.13     24,511         217       Sep/2022

EIB

   US$ + Libor      2.35     669,973         869,014       Sep/2021

Foreign loans

   GBP + Libor      3.93     230,954         312,940       Dec/2019

FRN

   US$      2.63     —           216,134       Jan/2017

NCE

   112% of CDI      15.95     156,038         406,805       Dec/2018
   109% of CDI      15.50     —           304,644       Oct/2018
   129,62% CDI      18.69     573,403         —         Jun/2023
   US$      3.79     —           126,669       Jul/2016

Perpetual Notes

   US$      8.25     1,643,558         1,976,673       —  

Resolution 4131

   US$      3.08     108,978         477,705       Oct/2020
   US$ + Libor      2.00     414,506         471,045       Mar/2018
   US$ + Libor      2.00     361,536         406,348       Nov/2016

Senior Notes Due 2018

   Fixed      9.50     164,297         875,376       Mar/2018

Senior Notes Due 2023

   US$      5.00     328,923         2,009,296       Mar/2023

Senior Notes Due 2027

   US$      7.00     2,378,320         —         Jan/2027

FINEP

   Fixed      5.00     116,192         137,133       Nov/2020

Trade banks

   CDI + 3,50% p.a.      18.12     —           205,781       Sep/2016
   CDI + 4,91% p.a.      19.73     180,212         195,632       Jun/2019
   Fixed      20.98     766         3,898       Jun/2016

Working capital

   CDI + 2,80% p.a.      17.33     406,022         388,203       Dec/2018
   CDI + 2,95% p.a.      17.50     299,400         —         Dec/2018
   US$ + Libor      4.45     —           100,121       Sep/2021
   CDI + 0,28% p.m.      18.02     6,683         25,004       Dec/2016
   121,10% do CDI      17.36     2,008         10,144       Nov/2016
   125,5% do CDI      18.04     10,184         17,764       Oct/2016

Prepayment

   US$+Libor Tri      3.80     56,338         —         Apr/2017

FINIMP

   US$+Libor Tri      3.17     41,283         —         Jun/2017
       

 

 

    

 

 

    
          13,061,860         14,703,813      

 

39


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

    

Interest

                   

Description

  

Index (i)

   Annual
interest  (ii)
    September 30,
2016
     December 31,
2015
    

Maturity

Debentures

             

Convertible debentures

   URTJLP      9.01     —           2,592       Jun/2016

Non-convertible debentures

   CDI + 2,05% p.a.      16.47     154,420         1,431,607       Mar/2018
   CDI + 1,30% p.a.      15.61     311,999         775,228       Oct/2017
   CDI + 3,50% p.a.      18.12     2,433,269         —         Jun/2023
   IPCA      15.08     658,038         594,157       Dec/2025
   108 % of CDI      15.34     338,455         526,285       Jul/2018
   IPCA      12.88     519,361         484,246       Sep/2020
   Fixed      13.13     169,154         161,175       Oct/2020
   CDI      15.16     126,855         119,785       Sep/2019
   % of net revenue      —          —           30,315       —  
       

 

 

    

 

 

    
          4,711,551         4,125,390      

Total

          17,773,411         18,829,203      
       

 

 

    

 

 

    

Current

          2,424,364         2,775,510      
       

 

 

    

 

 

    

Non-current

          15,349,047         16,053,693      
       

 

 

    

 

 

    

 

(i) TJLP and URTJLP are long-term interest rates on BNDES (Brazilian National Economic and Social Development Bank) loans. Selic is the benchmark interest rate set by the Brazilian Central Bank. CDI is a benchmark interbank lending rate in Brazil. IPCA is a benchmark consumer price index.
(ii) As at September 30, 2016.

On June 20, 2016, the Company issued Senior Notes in the international market in accordance with the “Regulation S” and rule “144A” in the amount of US$500 million, which are subject to interest at 7% pa The funds were used for partial repayment of Senior Note 2018 and Senior Note 2023. During the term of the notes, the Company must maintain the ratio “net debt divided by EBITDA”, besides other financial covenants.

On July 18, 2016 the Cosan Luxembourg S.A. (“Cosan Lux”) issued an additional U.S.$150,000,000 principal amount of its 7% Senior Notes due 2027. The Bonds are additional securities issued pursuant to the provisions of the indenture, dated as of June 20, 2016, among the Issuer, Cosan S.A. and Deutsche Bank Trust Company Americas, as Trustee (the “Trustee”).

On June 28, 2016 the subsidiary “Rumo” completed the structure of part of the debt reprofiling of Rumo and its subsidiaries maturing in 2016, 2017 and 2018 in the amount of R$2,925,647, with changes to certain terms and conditions, or issuance new working capital instruments. As a result of the operation non-convertible debentures were issued maturing in 2023 and contractual amendment of certain debts which extended the maturity to start from 2019 were implemented.

On July 1, 2016, the indirect subsidiary “Cosan Lubricants” contracted a loan “FINIMP” with Citibank in the amount of US$12,345 at an interest rate of Libor 3M + 2.52% pa, maturing on 30 June 2017. The funds were used to pay for raw materials imported.

 

 

40


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

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

 

     September 30,
2016
     December 31,
2015
 

Brazilian Real

     11,539,042         11,863,258   

US Dollar

     6,003,415         6,653,005   

Pound Sterling

     230,954         312,940   
  

 

 

    

 

 

 
     17,773,411         18,829,203   
  

 

 

    

 

 

 

Financial Covenants

The Company and its subsidiaries are subject to certain restrictive financial covenants set forth in existing loans, financing and debentures agreements in relation to certain financial and non-financial indicators. Financial ratios are: (i) consolidated net comprehensive debt (Bank loans, bonds, leases, certificates of real estate receivables net of cash and cash equivalents, marketable securities and derivative instruments)/ EBITDA; (ii) EBITDA / consolidated financial results (considers only interest on debentures, loans / financing and derivative activities); (iii) equity / net assets, on which is applicable only to BNDES.

Ø “Cosan S.A” and its subsidiaries

Except for BNDES, whose new net comprehensive debt indicators / EBITDA and ICD are yet to be set, all other creditors have agreed to a ratio of up to 5.5x net comprehensive debt / EBITDA. If the negotiations with BNDES require a lower leverage ratio, such ratio will be extended to all other creditors with equivalent covenants conditions. On September 30, 2016, quarterly financial covenants were met within the new established standards.

Ø “Cosan Logística” and its subsidiaries

The ratio agreed is up to 4.5x comprehensive net debt / EBITDA, the limit that was being complied with by the Company in the quarter ended September 30, 2016.

On September 30, 2016, the Company had R$ 68,376 loan from BNDES, subject to the provisions of “covenants” more restrictive than the indicator mentioned in the previous paragraph with measurement date of December 31, 2016. This requirement is being replaced by bank guarantees.

As at September 30, 2016, the Company and its subsidiaries were in compliance with all debt financial covenants.

 

41


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

17 Leases

Finance lease liabilities

Finance lease liabilities are payable as follows:

 

     September 30, 2016     December 31, 2015  
     Less than
one year
    Between
one and
five years
    More
than five
years
    Total     Total  

Future minimum lease payments

     700,173        960,867        365,519        2,026,559        2,196,200   

Rolling stock

     669,698        870,194        260,298        1,800,190        1,953,414   

Terminal

     23,664        85,123        105,221        214,008        232,148   

Other

     6,811        5,550        —          12,361        10,638   

Interests

     (156,735     (252,684     (83,022     (492,441     (454,499

Rolling stock

     (140,087     (208,506     (58,241     (406,834     (357,416

Terminal

     (15,435     (43,361     (24,781     (83,577     (96,069

Other

     (1,213     (817     —          (2,030     (1,014
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Present value of minimum lease payments

     543,438        708,183        282,497        1,534,118        1,741,701   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Current

           543,438        539,615   
        

 

 

   

 

 

 

Non-current

           990,680        1,202,086   
        

 

 

   

 

 

 

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 September 30, 2016, the future minimum lease payments under non-cancellable leases are as follows:

 

     September 30,
2016
     December 31,
2015
 

Future minimum lease payments

     

Less than one year

     12,018         22,788   

Between one and five years

     32,215         24,364   

More than five years

     11,796         13,528   
  

 

 

    

 

 

 
     56,029         60,680   
  

 

 

    

 

 

 

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

 

42


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

18 Concessions payable

 

     Concessions payable      Judicial deposits  
     September 30,
2016
     December 31,
2015
     September 30,
2016
     December 31,
2015
 

Payables

           

Malha Sul

     75,337         65,906         —           —     

Malha Paulista

     24,935         24,944         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
     100,272         90,850         —           —     

Court Discussion

           

Malha Paulista

     1,319,228         1,175,697         117,533         116,510   

Malha Oeste

     1,091,664         957,697         19,096         18,060   
  

 

 

    

 

 

    

 

 

    

 

 

 
     2,410,892         2,133,394         136,629         134,570   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2,511,164         2,224,244         136,629         134,570   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

     27,575         20,205         
  

 

 

    

 

 

       

Non-current

     2,483,589         2,204,039         
  

 

 

    

 

 

       

 

19 Trade payables

 

     September 30,
2016
    December 31,
2015
 

Natural gas suppliers

     1,376,294        1,489,552   

Materials and service suppliers

     767,397        627,067   

Fuels suppliers

     536        3,535   

Judicial deposits (i)

     (294,976     (294,976

Other

     66,403        139,834   
  

 

 

   

 

 

 
     1,915,654        1,965,012   
  

 

 

   

 

 

 

Current

     1,914,837        1,963,981   
  

 

 

   

 

 

 

Non-current

     817        1,031   
  

 

 

   

 

 

 

 

(i) On September 30, 2016, the balance of judicial discussion due to the fact of Petrobras is practicing different prices comparing to the market in gas supply is R$1,018,129, being the amount secured by judicial deposit R$294,976 and the amount guaranteed by bail R$723,153.

 

43


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

20 Other taxes payable

 

     September 30,
2016
     December 31,
2015
 

Tax amnesty and refinancing program—Refis

     49,680         56,041   

COFINS—Revenue tax

     29,787         23,080   

PIS—Revenue tax

     6,240         4,670   

INSS—Social security

     8,647         7,483   

Other

     26,098         39,901   

ICMS – State VAT

     94,777         73,692   
  

 

 

    

 

 

 
     215,229         204,867   
  

 

 

    

 

 

 

Current

     177,506         153,540   
  

 

 

    

 

 

 

Non-Current

     37,723         51,327   
  

 

 

    

 

 

 

 

21 Income tax and social contribution

 

a) Reconciliation of income and social contribution tax expenses:

 

     July 1, 2016 to
September 30,
2016
    January 1,
2016 to
September 30,
2016
    July 1, 2015 to
September 30,
2015 (Restated)
    January 1,
2015 to
September 30,
2015 (Restated)
 

Profit before taxes

     367,386        833,273        77,034        179,019   

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

     (124,911     (283,312     (26,191     (60,867

Adjustments to reconcile nominal to effective tax rate

        

Equity in earnings of investees (non-taxable income)

     140,296        374,481        9,999        86,200   

Credit claims for damages

     1,346        3,652        —          —     

Differences in tax rates on earnings / losses of overseas companies

     (12,303     (115,272     36,298        39,137   

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

     (253     (378     (153     392   

Tax profit of the activity (operating income)

     10,221        27,473        11,850        20,946   

Stock options expenses

     (1,002     (3,007     (996     (2,988

Interest on capital (net received)

     (8,330     (21,590     (12,818     (18,938

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

     (7,274     (12,926     (4,909     (18,628

Tax losses not recorded

     (64,167     (134,317     (24,895     (52,317

Costs of issuing equity instruments

     1,022        22,329        —          —     

Other

     (4,591     (9,111     (1,473     (2,714
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     (69,946     (151,978     (13,288     (9,777
  

 

 

   

 

 

   

 

 

   

 

 

 

Effective rate—%

     19,03        18,23        17,24        5,46   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

44


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

b) Deferred income tax assets and liabilities:

 

     September 30, 2016     December 31, 2015  
     Basis     Income
taxes (25%)
    Social
contribution (9%)
    Total income
taxes (34%)
    Total income
taxes (34%)
 

Tax loss carry forwards

          

Income tax loss carry forwards

     7,906,291        1,976,573        —          1,976,573        1,597,697   

Social contribution tax loss carry forwards

     8,046,363        —          724,173        724,173        580,269   

Temporary differences

          

Foreign currency losses

     1,659,281        414,820        149,335        564,155        937,281   

Provision for judicial demands

     1,133,546        283,387        102,019        385,406        354,730   

Impairment

     918,856        229,714        82,697        312,411        350,325   

Business combination—Property, plant and equipment

     445,004        111,251        40,050        151,301        246,757   

Tax deductible goodwill

     (75,628     (18,907     (6,806     (25,713     129,207   

Gains or losses on actuarial liabilities

     318,917        79,729        28,703        108,432        103,820   

Allowance for doubtful accounts

     445,782        111,446        40,120        151,566        95,015   

Regulatory asset

     213,146        53,286        19,183        72,469        76,764   

Profit sharing

     61,279        15,320        5,515        20,835        32,327   

Concession contract

     (32,648     (8,162     (2,938     (11,100     (12,552

Assets held for sale

     —          —          —          —          (1,255

Business combination—Other fair value adjustments

     (126,628     (31,657     (11,397     (43,054     (66,404

Property, plant and equipment

     (524,199     (131,050     (47,178     (178,228     (147,749

Unrealized gains on derivatives instruments

     (391,761     (97,940     (35,258     (133,198     (469,899

Unrealized gains on investment properties

     —          —          —          —          (62,069

Gain on formation of joint ventures

     (3,338,342     (834,586     (300,451     (1,135,037     (1,135,037

(-) Valuation allowance

     (5,186,506     (1,296,627     (466,786     (1,763,413     (1,526,639

Business combination—Intangible assets

     (11,094,306     (2,773,576     (998,488     (3,772,064     (3,839,323

Other

     1,058,059        264,515        95,227        359,742        275,782   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net liability

       (1,652,464     (582,280     (2,234,744     (2,480,953

Deferred income tax—Assets

           1,430,900        1,698,611   

Deferred income tax—Liabilities

           (3,665,644     (4,179,564
        

 

 

   

 

 

 

Total net deferred taxes

           (2,234,744     (2,480,953
        

 

 

   

 

 

 

 

c) Changes in deferred income taxes, net:

 

At December 31, 2015—Net deferred tax liability

     (2,480,953

Recorded through income

     64,562   

Recorded through other comprehensive income

     (342

Discontinued operation

     184,844   

Business combinations

     (32,028

Other (i)

     29,173   
  

 

 

 

At September 30, 2016—Net deferred tax liability

     (2,234,744
  

 

 

 

 

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

 

45


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

22 Provision for legal proceedings

 

     Provision for legal proceedings      Judicial deposits  
     September 30,
2016
     December 31,
2015
     September 30,
2016
     December 31,
2015
 

Tax

     471,698         441,674         370,262         377,435   

Civil, regulatory and environmental

     342,401         284,344         185,730         181,180   

Labor

     454,610         467,913         139,601         121,609   
  

 

 

    

 

 

    

 

 

    

 

 

 
     1,268,709         1,193,931         695,593         680,224   
  

 

 

    

 

 

    

 

 

    

 

 

 

Changes in provision for legal proceedings:

 

     Tax     Civil, regulatory
and
environmental
    Labor     Total  

At December 31, 2015

     441,674        284,344        467,913        1,193,931   

Accruals

     9,742        34,272        85,661        129,675   

Write-off / Reversals

     (7,806     (26,718     (131,168     (165,692

Indexation and interest charges

     28,088        50,503        32,204        110,795   
  

 

 

   

 

 

   

 

 

   

 

 

 

At September 30, 2016

     471,698        342,401        454,610        1,268,709   
  

 

 

   

 

 

   

 

 

   

 

 

 

Tax claims

 

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

 

     September 30,
2016
     December 31,
2015
 

Compensation with FINSOCIAL

     265,830         255,022   

State VAT—ICMS credits

     83,519         79,417   

INSS—Social security

     61,853         57,916   

PIS and COFINS

     2,413         2,781   

IPI—Excise tax credit—NT

     1,136         1,105   

Federal income taxes

     329         329   

Other

     56,618         45,104   
  

 

 

    

 

 

 
     471,698         441,674   
  

 

 

    

 

 

 

 

46


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

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

 

     September 30,
2016
     December 31,
2015
 

ICMS—State VAT

     2,037,991         1,904,253   

Federal income taxes (i)

     1,742,791         886,178   

Foreign financial operation

     968,237         911,942   

PIS and COFINS—Revenue taxes

     806,874         879,669   

IRRF—Withholding tax

     777,661         792,104   

INSS—Social security and other

     614,839         577,686   

IPI—Excise tax credit—NT

     507,831         484,606   

Goodwill ALL

     474,735         446,535   

Penalties related to tax positions

     387,373         258,391   

Compensation with IPI—IN 67/98

     127,250         123,522   

MP 470—Tax installments

     118,605         113,814   

Intermodal

     79,838         76,914   

Stock option

     61,089         57,554   

Financial transactions tax on loan

     53,675         49,844   

Social security contributions

     43,061         40,855   

Award credit compensation

     37,604         —     

Other

     1,041,434         952,651   
  

 

 

    

 

 

 
     9,880,888         8,556,518   
  

 

 

    

 

 

 

 

(i) The tax contingencies relate to the tax assessments mainly in the Federal sphere and are classified as possible losses by the legal counsel and management and, therefore, no reserve was required. Until the date of approval of the interim financial statements, the Company had knowledge of an assessment notice on goodwill amortization expense amounting possible is R$618,992. The tax assessment is being challenged at the administrative level.

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.

 

    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.

 

 

47


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

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:

 

     September 30,
2016
     December 31,
2015
 

Civil

     2,754,730         2,385,643   

Labor

     1,033,951         960,446   

Regulatory

     374,116         339,267   

Environmental

     338,688         295,984   
  

 

 

    

 

 

 
     4,501,485         3,981,340   
  

 

 

    

 

 

 

 

23 Shareholders’ equity

 

a) Share capital

As of September 30, 2016, Cosan Limited’s share capital is composed of the following:

 

Shareholders—Common shares

   Class A and /
or BDRs
     %      Class B1
shares
     %  

Queluz Holdings Limited

     9,933,168         5,70         66,321,766         68,85   

Usina Costa Pinto S.A. Açúcar e Álcool

     —           —           30,010,278         31,15   

Gávea Investimentos Ltda.

     17,126,127         9,82         —           —     

Skagen AS

     16,220,419         9,30         —           —     

MSOR Participações S.A.

     1,811,250         1,04         —           —     

Other

     123,267,875         70,70         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

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 September 30, 2016 and December 31, 2015 with a market value of U.S.$7.15 per share at September 30, 2016 (U.S.$3.69 per share at December 31, 2015).

 

48


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

c) Other comprehensive (loss) income

 

     December 31,
2015
    Comprehensive
(loss) income
    September 30,
2016
 

Foreign currency translation effects

     (468,350     141,946        (326,404

Loss on cash flow hedge in joint ventures and subsidiaries

     (235,779     (174,200     (409,979

Revaluation of investment properties reclassified from property, plant and equipment

     190,735        —          190,735   

Actuarial gain on defined benefit plan

     28,032        —          28,032   

Financial instrument with subsidiary

     —          6,000        6,000   

Changes in fair value of available for sale securities

     6,748        391        7,139   
  

 

 

   

 

 

   

 

 

 

Total

     (478,614     (25,863     (504,477
  

 

 

   

 

 

   

 

 

 

Attributable to:

      

Owners of the Company

     (478,207     7,582        (470,625

Non-controlling interests

     (407     (33,445     (33,852

 

     December 31,
2014
    Comprehensive
(loss) income
    September 30,
2015
 

Foreign currency translation effects

     (298,446     (193,689     (492,135

Loss on cash flow hedge in joint ventures and subsidiaries

     (10,574     (40,790     (51,364

Revaluation of investment properties reclassified from property, plant and equipment

     190,735        —          190,735   

Actuarial gain on defined benefit plan

     47,104        —          47,104   

Changes in fair value of available for sale securities

     (1,467     4,939        3,472   
  

 

 

   

 

 

   

 

 

 

Total

     (72,648     (229,540     (302,188
  

 

 

   

 

 

   

 

 

 

Attributable to:

      

Owners of the Company

     (165,618     (197,035     (362,653

Non-controlling interests

     92,970        (32,505     60,465   

 

49


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

24 Earnings per share

The following table sets forth the calculation of earnings per share for the period ended September 30, 2016 and 2015 (in thousands of Brazilian Reais, except per share amounts):

 

     July 1, 2016 to
September 30,
2016
    January 1, 2016 to
September 30,
2016
    July 1, 2015 to
September 30,
2015 (Restated)
    January 1, 2015 to
September 30,
2015 (Restated)
 

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

     158,193        315,865        46,002        48,975   

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

     4,112        15,491        3,519        12,570   

Effect of dilution:

        

Brados’s dilutive options

     —          —          (436     —     

ALL’s debentures

     —          —          43        (131

Dilutive effect of subsidiary’s stock option plan

     (1,020     (1,725     (6     12   

Dilutive effect of subsidiary’s stock option plan—discontinued operation

     (23     (43     —          —     

Dilutive effect of put option

     (15,601     (15,601     (15,601     (15,601

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

     141,572        298,539        30.002        33.255   

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

     4,089        15,449        3,519        12,570   

Weighted average number of shares outstanding

     264,690,883        264,690,883        264,690,883        264,690,883   

Basic earnings per share from:

        

Continuing operations

     R$0.59765        R$1.19333        R$0.17380        R$0.18503   

Discontinuing operations

     R$0.01554        R$0.05853        R$0.01329        R$0.04749   

Diluted earnings per share from:

        

Continuing operations

     R$0.53477        R$1.12787        R$0.11335        R$0.12564   

Discontinuing operations

     R$0.01545        R$0.05836        R$0.01329        R$0.04749   

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.

The stock option plan is out of money, so, the exercise price of the options granted is much higher than the average stock price during the period. These financial instruments have antidilutive effects in the periods presented.

 

50


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

25 Other (expense) income, net

 

     July 1, 2016 to
September 30,
2016
    January 1,
2016 to
September 30,
2016
    July 1, 2015 to
September 30,
2015 (Restated)
    January 1,
2015 to
September 30,
2015 (Restated)
 

Settlement of pre-existing relationship with business combinations

     —          —          —          29,838   

Insurance reimbursement income

     3,240        10,808        5,633        13,877   

Rental income

     800        2,016        259        2,380   

Cost related to internal organization and prospective acquisitions

     (323     (323     (59     (101,423

Changes in the fair value of investment properties

     —          —          —          —     

Loss on disposal of non-current assets

     (6,281     (15,505     (103     (2,762

Provisions for legal proceedings

     (17,954     (94,145     (17,868     (42,010

Other

     3,616        13,930        10,904        16,678   
  

 

 

   

 

 

   

 

 

   

 

 

 
     (16,902     (83,219     (1,234     (83,422
  

 

 

   

 

 

   

 

 

   

 

 

 

 

51


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

26 Financial results

 

     July 1, 2016 to
September 30,
2016
    January 1,
2016 to
September 30,
2016
    July 1, 2015 to
September 30,
2015 (Restated)
    January 1,
2015 to
September 30,
2015 (Restated)
 

Cost of gross debt

        

Interest on debt

     (480,142     (1,383,622     (197,290     (724,646

Monetary and exchange rate variation

     (55,842     943,902        (1,102,124     (1,695,765

Derivatives (i)

     (66,464     (1,431,499     847,708        1,248,612   

Amortization of borrowing costs

     (7,272     (69,781     —          —     

Discounts obtained from financial operations

     688        85,962        —          —     

Guarantees and warranties on debt

     (12,797     (35,774     (6,212     (17,549
  

 

 

   

 

 

   

 

 

   

 

 

 
     (621,829     (1,890,812     (457,918     (1,189,348

Income from financial investment

     131,646        395,580        100,207        239,338   
  

 

 

   

 

 

   

 

 

   

 

 

 
     131,646        395,580        100,207        239,338   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of debt, net

     (490,183     (1,495,232     (357,711     (950,010

Other charges and monetary variations

        

Interest on other receivables

     52,524        184,477        82,657        111,214   

Monetary variation on leases and concessions agreements

     (76,089     (221,671     (62,498     (116,189

Monetary variation on leases

     (55,981     (158,074     (43,605     (65,822

Bank charges

     (55,230     (165,953     (33,378     (90,379

Advances on real state credits

     (9,372     (21,378     (11,977     (11,977

Interest on other liabilities

     (160,787     (526,724     (105,545     (275,127

Interest on other financial assets

     20,894        20,894        —          —     

Exchange variation

     5,837        53,731        (3,486     (11,839
  

 

 

   

 

 

   

 

 

   

 

 

 
     (278,204     (834,698     (177,832     (460,119
  

 

 

   

 

 

   

 

 

   

 

 

 

(=) Financial results, net

     (768,387     (2,329,930     (535,543     (1,410,129

Finance expense

     (1,140,312     (2,859,507     (666,221     (1,609,950

Finance income

     263,408        834,976        194,875        382,222   

Exchange variation

     (47,689     1,011,866        (271,185     (764,917

Derivatives

     156,206        (1,317,265     206,988        582,516   
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial results, net

     (768,387     (2,329,930     (535,543     (1,410,129
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(i) The balances of fair value of derivatives that were presented under interest and monetary variation on September 30, 2015 were relocated to the caption derivatives and fair value for better presentation of this financial information. The impact of reallocating the number of September 30, 2015 was R$127,184.

 

52


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

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:

 

     September 30,
2016
     December 31,
2015
 

Assets

     

Fair value through profit or loss

     

Investment funds

     2,003,117         2,216,149   

Marketable securities

     1,385,289         605,490   

Other financial assets

     —           144,208   

Derivate financial instruments

     1,225,076         2,430,296   
  

 

 

    

 

 

 
     4,613,482         5,396,143   

Loans and receivables

     

Cash and cash equivalents

     1,144,847         1,289,675   

Trade receivables

     1,107,832         964,978   

Restricted cash

     195,461         258,183   

Receivables from related parties

     243,334         296,574   

Dividends receivable

     6,291         12,064   
  

 

 

    

 

 

 
     2,697,765         2,821,474   

Total

     7,311,247         8,217,617   
  

 

 

    

 

 

 

 

53


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

 

Liabilities

     

Liabilities amortized cost

     

Loans, borrowings and debentures

     13,209,066         13,895,414   

Leases

     1,534,118         1,741,701   

Real state credit certificates

     220,576         285,006   

Trade payables

     1,915,654         1,965,012   

Other financial liabilities

     248,374         236,698   

Payables to related parties

     230,996         204,080   

Dividends payable

     22,480         39,934   

Tax installments—REFIS

     49,680         56,041   

Preferred shareholders payable in subsidiaries

     2,023,988         2,042,878   
  

 

 

    

 

 

 
     19,454,932         20,466,764   

Fair value through profit or loss

     

Loans, borrowings and debentures

     4,564,345         4,933,789   

Contingent consideration

     146,523         217,377   

Post-employment benefits

     358,065         344,447   

Derivative financial instruments

     628,648         742,498   
  

 

 

    

 

 

 
     5,697,581         6,238,111   
     25,152,513         26,704,875   
  

 

 

    

 

 

 

Risk management structure

As at September 30, 2016 and December 31, 2015, 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  
     September 30,
2016
     December 31,
2015
     September 30,
2016
    December 31,
2015
 

Exchange rate derivatives

          

Forward agreements

     60,337         2,058,190         (7,027     46,247   

Interest rate and exchange rate risk

          

Swap agreements (interest rate)

     1,991,243         1,083,526         91,955        (107,230

Cross currency interest rate swaps

     4,106,780         4,629,948         511,500        1,748,781   
  

 

 

    

 

 

    

 

 

   

 

 

 
     6,098,023         5,713,474         603,455        1,641,551   

Total financial instruments

  

     596,428        1,687,798   
        

 

 

   

 

 

 

Assets

           1,225,076        2,430,296   
        

 

 

   

 

 

 

Liabilities

           (628,648     (742,498
        

 

 

   

 

 

 

 

54


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

Credit risk

 

     September 30,
2016
     December 31,
2015
 

Cash and cash equivalents (i)

     3,147,964         3,505,824   

Trade receivables (ii)

     1,107,832         964,978   

Other financial assets (ii)

     —           144,208   

Derivative financial instruments (i)

     1,225,076         2,430,296   

Marketable securities (i)

     1,385,289         605,490   

Restricted cash (i)

     195,461         258,183   

Dividends receivable

     6,291         12,064   
  

 

 

    

 

 

 
     7,067,913         7,921,043   
  

 

 

    

 

 

 

 

(i) The cash and cash equivalents are held with bank and financial institution counterparties, which are rated BB to AAA.

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 show below. The position of derivative financial instruments considers the net exposure of derivatives which have exactly the same flow, with the same bank, and counter signs.

 

     September 30,
2016
     December 31,
2015
 

AAA

     1,594         1,473,089   

AA

     2,502,382         4,068,000   

AA-

     1,447,869         —     

A

     1,187,700         357,399   

A+

     42,740         —     

BB

     —           207,097   

BBB

     85,957         —     

BBB-

     136,292         580,233   
  

 

 

    

 

 

 
     5,404,534         6,685,818   
  

 

 

    

 

 

 

 

(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.

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. The Company’s maximum exposure to credit risk for the components of the statement of financial position is the carrying amounts as illustrated in Note 16. The Company’s maximum exposure for financial guarantees and financial derivative instruments are as below.

 

 

55


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

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:

 

     September 30, 2016     December 31, 2015  
     Up to 1 year     1—2 years     3—5 years     More than
5 years
    Total     Total  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans, borrowings and debentures

     (4,151,917     (4,156,433     (10,339,042     (10,244,907     (28,892,299     (29,450,102

Trade payables

     (1,914,836     —          —          —          (1,914,836     (1,965,012

Other financial liabilities

     (248,374     —          —          —          (248,374     (236,698

REFIS

     (13,640     (11,944     (19,624     (11,679     (56,887     (64,529

Leases

     (693,539     (451,726     (667,636     (380,936     (2,193,837     (2,132,455

Real estate credits certificates

     (138,824     (121,371     (18,150     —          (278,345     (382,559
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (7,161,130     (4,741,474     (11,044,452     (10,637,522     (33,584,578     (34,231,355
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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.

 

 

56


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

a) Foreign exchange risk

As at September 30, 2016 and December 31, 2015, the Company and its subsidiaries had the following net exposure to the exchange rate variations on assets and liabilities denominated in Brazilian Reais:

 

     September 30, 2016     December 31, 2015  
     R$     US$     R$     US$  

Cash and cash equivalents

     684,505        210,864        256,003        65,561   

Trade receivables

     30,570        9,417        18,227        4,668   

Advances to suppliers

     67,102        20,671        85,155        21,808   

Trade payables

     (68,924     (21,232     (15,894     (4,070

Loans, borrowings and debentures

     (6,708,840     (2,066,674     (6,653,006     (1,703,802

Advances from clients

     —          —          (1,701     (436

Contingent consideration

     (52,392     (16,139     (65,064     (16,663

Derivative financial instruments

     4,826,861        1,486,926        6,688,138        1,712,799   
  

 

 

   

 

 

   

 

 

   

 

 

 

Foreign exchange exposure, net

     (1,221,118     (376,167     311,858        79,865   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sensitivity analysis on changes in foreign exchange rates:

The probable scenario was defined based on the U.S. Dollar market rates as at September 30, 2016, 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 September 30, 2016, 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$/US$)  
     September 30,
2016
     Scenario  
        Probable      25%      50%      -25%      -50%  

USD

     3.2462         3.5731         4.4664         5.3597         2.6798         1.7866   

The external source used by the Company for market projections was the BM&F BOVESPA.

 

57


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

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      109,495        77,018        154,006        (76,958     (153,946

Trade receivables

   USD fluctuation      1,801        8,551        16,643        (7,634     (15,727

Advances to suppliers

   USD fluctuation      1,822        19,171        36,521        (15,538     (32,877

Trade payables

   USD fluctuation      (1,832     (19,521     (37,210     15,857        33,546   

Exchange rate derivatives (i)

   USD fluctuation      (4,615     13,663        26,984        (12,979     (26,301

Exchange rate and interest derivatives (i)

   USD and CDI fluctuation      397,241        1,279,895        2,559,790        (1,279,895     (2,559,790

Loans, borrowings and debentures

   USD fluctuation      (836,942     (1,017,000     (2,034,000     1,017,000        2,034,000   

Contingent consideration

   USD fluctuation      (5,276     (14,417     (28,834     14,417        28,834   
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Impacts on profit or loss

        (338,306     347,360        693,900        (345,730     (692,261
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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:

 

     September 30, 2016  

Exposure interest rate (i)

   Probable     25%     50%     -25%     -50%  

Cash and cash equivalents

     550,301        137,575        275,151        (137,575     (275,151

Leases

     (97,923     (24,481     (35,418     24,481        35,418   

Advances on real state credits

     (31,168     (7,792     (15,584     7,792        15,584   

Interest rate derivatives

     89,860        (242,100     (526,796     349,600        782,584   

Loans, borrowings and debentures

     (1,988,876     (474,291     (948,583     474,291        948,583   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Impacts on profit or loss

     (1,477,806     (611,089     (1,251,230     718,589        1,507,018   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

58


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

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

 

     Probable     25%     50%     -25%     -50%  

SELIC

     12.50     15.63     18.75     9.38     6.25

CDI

     12.48     15.60     18.72     9.36     6.24

TJ462

     8.50     10.63     12.75     6.38     4.25

TJLP

     7.50     9.38     11.25     5.63     3.75

IPCA

     5.15     6.44     7.73     3.86     2.58

LIBOR

     1.20     1.50     1.80     0.90     0.60

The external source used by the Company for market projections was the BM&F BOVESPA.

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 Due 2018, 2023 and 2027 listed on the Luxembourg Stock Exchange (Note 16) is based on their quoted market price as of September 30, 2016, of 95.55% (78.71% on December 31, 2015) and 97.54% (83.83% at December 31, 2015), and 104,53%, respectively, of the face nominal value at September 30, 2016.

 

    The fair value of Perpetual Notes listed on the Luxembourg Stock Exchange (Note 16) is based on their quoted market price as September 30, 2016 of 99.52% (79.64% at December 31, 2015) of the face value of obligations at September 30, 2016.

 

    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).

 

59


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

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.

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

 

     Carrying amount     Assets and liabilities measured at fair value  
     September 30,
2016
    December 31,
2015
    September 30, 2016     December 31, 2015  
         Level 1      Level 2     Level 1      Level 2  

Assets

              

Investment funds

     2,003,117        2,244,427        —           2,003,117        —           2,244,427   

Marketable securities

     1,385,289        605,490        —           1,385,289        —           605,490   

Other financial assets

     —          144,208        —           —          —           144,208   

Derivate financial instruments

     1,225,076        2,430,296        —           1,225,076        —           2,430,296   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

     4,613,482        5,424,421        —           4,613,482        —           5,424,421   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Liabilities

              

Loans, borrowings and debentures

     (4,564,345     (4,933,789     —           (4,564,345     —           (4,933,789

Post-employment benefits

     (358,065     (344,447     —           (358,065     —           (344,447

Contingent consideration

     (146,523     (217,377     —           (146,523     —           (217,377

Derivative financial instruments

     (628,648     (742,498     —           (628,648     —           (742,498
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

     (5,697,581     (6,238,111     —           (5,697,581     —           (6,238,111
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Hedge accounting – Fair value

Currently the Company has adopted the fair value hedge for some of 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, 2015

     2,522,772        (822,586     1,700,186   

Interest amortization

     (72,662     241,521        168,859   

Fair value

     (293,891     424,964        131,073   
  

 

 

   

 

 

   

 

 

 

At September 30, 2016

     2,156,219        (156,101     2,000,118   
  

 

 

   

 

 

   

 

 

 

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.

 

 

60


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

28 Post-employment benefits

 

     September 30,
2016
     December 31,
2015
 

Futura

     48,559         48,414   

Futura II

     244         335   

COMGÁS

     309,262         295,698   
  

 

 

    

 

 

 
     358,065         344,447   
  

 

 

    

 

 

 

During the period ended September 30, 2016, the expense recognized in relation to the actuarial contributions was R$18,934 (R$17,006 for the nine month period ended September 30, 2015).

 

29 Share-based payment

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

 

     Expected
life
(years)
                 Number of instruments on September 30, 2016      Market
price on
grant date
     Exercise
price at
September 30,
2016
     Fair value
at grant
date—R$ (i)
 
        Interest
rate
    Expected
volatility
    Granted      Exercisable
options
    Outstanding           

Share option programs

                       

August 18, 2011 (A)

     1 to 5         12,39     31,44     4,825,000         (2,720,000     1,785,000         22.98         24.02         6.80   

August 18, 2011 (B)

     1 to 10         12,39     30,32     5,000,000         (1,100,000     3,900,000         22.98         24.02         8.15   

December 12, 2012 (C)

     1 to 5         8,78     31,44     700,000         (48,000     652,000         39.80         42.08         10.10   

April 24, 2013

     5         13,35     27,33     970,000         —          945,000         46.51         38.23         17.95   

April 25, 2014

     5         12,43     29,85     960,000         —          945,000         37.10         39.24         15.67   

August 31, 2015

     5         14,18     33,09     759,000         —          759,000         18.15         19.94         7.67   

October 2, 2015

     5         15,66     62,94     4,485,238         —          4,205,238         6.30         7.97         2.83   
         

 

 

    

 

 

   

 

 

          
            17,699,238         (3,868,000     13,191,238            
         

 

 

    

 

 

   

 

 

          

 

(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:

 

     Number of options     Weighted-average
exercise price—R$
 

At December 31, 2015

     13,876,238        24.22   

Cancellation or settlements

     (70,000     —     

Share options exercised

     (653,750     26.50   
  

 

 

   

 

 

 

At September 30, 2016

     13,152,488        24.31   
  

 

 

   

 

 

 

 

61


Cosan Limited

Notes to the consolidated financial statements

For the nine month periods ended September 30, 2016 and 2015

(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)

 

 

30 Subsequent events

Approval of the sale’s shares—Radar and Radar II

On October 18, 2016, CADE approved the stock sale of the Radar and Radar II, in which Cosan agrees to sell to Mansilla part of its interests held in the companies. On November 4, 2016 the sales value was received.

***

 

62


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: November 10, 2016

 

COSAN LIMITED
By:   /s/ Marcelo Eduardo Martins
 

Name: Marcelo Eduardo Martins

Title: Chief Financial Officer

 

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