Brazil's big cane mills cut costs, capex against losses
By Reese Ewing
SAO PAULO Feb 14 (Reuters) - Weak sugar prices, government fuel price controls and a year of frost and drought are forcing Brazil's listed sugar and ethanol companies to cut costs and consider layoffs, as earnings reports this week have shown.
Local sugar and ethanol units controlled by Louis Dreyfus , Cosan, Bunge, Tereos and others see the cuts as essential, to stem losses until sugar prices recover from four-year lows and they can limit or reverse the negative impact of government policies on their profitability.
Takeovers and other alternatives to consolidate the industry are tough because of bleak market conditions and debt taken on during a decade of expansion. Offers from newcomers in Asia and Europe are often too low to let potential sellers recoup their investments.
Even the weather is not cooperating. Severe drought has already led analysts to cut their outlook for the harvest that begins in the coming weeks.
And there are no clear signs of imminent relief.
COMPANIES' LOSSES GROWING
Brazil's biggest sugar and ethanol milling group, Raizen Energia SA expects a loss for the quarter ending Dec. 31, of 115.4 million reais ($48 million), compared with a profit of 164.3 million reais in the year-ago period. Raizen Energia is part of a joint venture between Brasil's Cosan SA and Royal-Dutch Shell, the Anglo-Dutch oil company. Continuación...