Cosan (CSAN) Q2 2026 earnings review
Deleveraging Execution Impresses, But Cash Flow Margins Remain Razor Thin
Cosan is forcefully executing its simplification and deleveraging strategy, cutting expanded net debt by 20% sequentially to R$9.2 billion following R$8.8 billion in early debt settlements. The net loss narrowed dramatically to R$320 million, aided by a R$537 million sequential improvement in financial results and aggressive G&A cuts. However, the balance sheet restructuring has temporarily drained liquidity: the Debt Service Coverage Ratio (DSCR) plummeted to a precarious 0.2x, driven by dividend seasonality and residual high interest burdens. While Moove's post-fire operational rebound and Compass's IPO generated strong positive momentum, agricultural exposure via Radar and Raízen continues to act as a drag on holding company metrics.
🐂 Bull Case
Management is delivering on its promise to de-risk the holding company. Expanded net debt was nearly halved YoY (-47%) to R$9.2B, driven by the Compass IPO, asset sales, and R$8.8B in debt prepayments that drastically derisk the 2028 amortization wall.
Despite a major fire in the prior quarter and global supply chain shocks (Strait of Hormuz), Moove's EBITDA doubled sequentially to R$475M. The team successfully managed inventory to protect margins and supply clients during a crisis.
🐻 Bear Case
The DSCR crashed to 0.2x on an LTM basis. Even though management projects a recovery to 0.8x-1.2x by year-end, the current ratio implies Cosan is temporarily reliant on asset sales rather than organic subsidiary dividends to service its holdco debt.
Radar's EBITDA reversed to negative R$29M due to lower TRS (Total Recoverable Sugar) prices and land revaluations. Meanwhile, Raízen's equity pickup remains at zero following significant prior impairments, keeping a core historical engine stalled.
⚖️ Verdict: ⚪
Neutral. The structural deleveraging and corporate simplification are highly impressive and exactly what the market demanded. However, with the DSCR at 0.2x and key macro segments lagging, the margin of safety for cash flow remains too thin to turn outright bullish.
Key Themes
DSCR Collapses to Precarous Levels
Cosan's Debt Service Coverage Ratio (DSCR) deteriorated further, decelerating from 0.4x in 26Q1 to just 0.2x in 26Q2. This was driven by a R$2.4 billion YoY drop in LTM dividends and interest on capital received, alongside persistently high legacy financial expenses. While management claims this is the 'inflection point' and expects normalization as dividend seasonality kicks in, a 0.2x ratio means operational cash inflows are severely failing to cover debt obligations in the short term.
Holdco Deleveraging Execution
The overriding strategic priority—deleveraging the holding company to zero or near-zero—is accelerating. Cosan executed R$8.8 billion in early debt settlements in 6M26, retiring 2029, 2030, and 2031 bonds. This structurally reduced the 2028 amortization wall by 85%. Expanded net debt is down 47% YoY. This structurally lowers the CDI+1.15% average cost of debt burden moving forward.
Moove Rebounds Against Macro Shocks
Moove proved its operational resilience. Following a severe fire at its Rio plant and amid the macro supply crisis caused by the closure of the Strait of Hormuz, Moove's EBITDA surged to R$475M, more than doubling vs 26Q1. Management aggressively adapted via profitability-focused inventory management, ensuring supply availability and driving a 24% YoY increase in net sales revenue to R$2.78B.
Edge Platform Optimizes Compass Margins
Compass demonstrated how technology and structural mix-shifts can offset weak macro demand. Overall distributed gas volume was actually down 1% due to weak industrial consumption (chemical, steel, ceramics). However, EBITDA grew 5% YoY to R$1.27B. This margin expansion was driven by growth in the higher-margin residential segment and load optimization algorithms executed by its Edge platform in the unregulated market.
Radar's Profitability Reversing
A major red flag within the portfolio: Radar's Adjusted EBITDA reversed sharply from a positive R$134M in 25Q2 to a negative R$29M in 26Q2. This directly contradicts the broader narrative of portfolio stability. The collapse was driven by lower lease revenues tied to falling ATR (Total Recoverable Sugar) prices and negative non-cash land revaluations connected to its ongoing R$1.85 billion land sale.
Corporate Simplification and Cost Cuts
Management is aggressively shrinking the holding company. G&A expenses dropped 46% YoY to R$42 million in 26Q2, saving R$49 million in the first half of the year. The company is eliminating duplicate corporate layers, shedding its ADR listing to save compliance costs, and executing management changes (CFO Rafael Bergman departing, Marcos Cesario returning) to consolidate teams and force efficiencies.
Other KPIs
Stable (-1% YoY). Volume transported grew 9% to 23.8 bn RTK, driven by North and South grain operations. However, the contribution margin per '000 RTK declined 3% to R$122, reflecting competitive tariff environments. Excluding non-recurring insurance indemnities from the prior year base, EBITDA would have grown 4%.
A substantial improvement from the R$946 million loss in 25Q2 and R$1.58 billion loss in 26Q1. The loss was exacerbated by a R$233 million impairment related to the R$300 million sale of the Port São Luís. Excluding this one-off, the net loss would have narrowed to R$167 million.
Guidance
Accelerating dramatically from the current 0.2x level. Achieving the midpoint (1.0x) implies a 400% sequential improvement. Management expects this to be driven by R$1.3B to R$1.8B in ordinary dividends (including up to R$586M from the Radar land sale) and lower baseline financial expenses following 1H26's aggressive debt prepayments.
Key Questions
Moove's Normalized Run-Rate
Moove's EBITDA doubled sequentially due to proactive inventory management during the Hormuz supply shock. As raw material costs rise and supply normalizes, how much of this R$475M quarterly EBITDA is structural versus one-time macro tailwind?
DSCR Bridge and Liquidity Buffer
You are guiding for DSCR to exit the year at 0.8x-1.2x based heavily on R$1.3-1.8B in expected dividends, including Radar land sales. If real estate closings are delayed past October, does the holding company have sufficient liquidity buffers to manage without additional expensive bridge financing?
Rumo Stake Monetization
You previously signaled intentions to optimize the portfolio by potentially selling down a stake in Rumo. Given the R$8.8B in prepayments and the Compass IPO, has the 'sense of urgency' to monetize Rumo shares diminished, or are you still actively fielding binding proposals?