Brazil Cosan returns to profit on derivatives

SAO PAULO (Reuters) - Cosan, one of Brazil's biggest sugar and ethanol groups, returned to profit in the April-through-June quarter as rising sugar prices lifted revenue and the company posted sizzling gains on derivatives contracts.

Net profit at Cosan was a record 337.3 million reais (US$184 million) compared with a net loss of 58.1 million reais a year earlier, it said in a regulatory filing posted on Friday.

Revenue soared nearly sixfold to 3.6 billion reais, reflecting higher sales volumes of sugar and ethanol and an average increase of about a third in sugar prices over the three months ended in June 30, the company said.

The difference between revenue from financial investments and debt-servicing, known as net financial result, surged to 433.4 million reais in the quarter from 87 million reais a year earlier.

The use of derivatives contracts to hedge against fluctuations in the currency and commodity prices boosted the financial result by 289 million reais, Cosan said.

The strategy helped offset the impact of a weaker real, which lifted debt-servicing costs in the quarter, Cosan said. The average exchange rate for the real weakened to 2.075 reais per dollar from 1.62 reais a year earlier.

"Fluctuations (in commodity and currency prices) had a very relevant impact on net income for the period," the company said.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, -- a key measure of cash flow -- jumped to 331.2 million reais compared with 29.2 million reais in the same quarter in 2008. If hedging operations were excluded, a measure known as EBITDAH rose to 472 million reais from 74.4 million a year earlier.

Cosan bought ExxonMobil's assets in Brazil in April 2008, for $826 million.

The company's operating year starts on April 1 and ends on March 31, as it follows the sugar cane harvesting cycle in Brazil's center-south region.

Sugar prices have risen in recent months as India, the world's top sugar consumer, has gone from a net sugar exporter to net importer after a steep drop in its local output.

Brazil is the world's largest sugar and cane-based ethanol producer and exporter.

(Editing by John Picinich)