By Brazil Stock Guide – Jalles Machado SA (JALL3) returned to profit in the third quarter of fiscal 2025/26, supported by a stronger ethanol mix and gains from hedge operations, even as sugar prices faced sustained pressure in global markets.
The Goiás-based sugar and ethanol producer reported net income of R$55.4 million in the third quarter ended Dec. 31, reversing a loss of R$73.5 million a year earlier. For the first nine months of the crop year, net income totaled R$60.4 million, compared with a loss of R$42.1 million in the prior-year period.
Adjusted EBITDA Rises Despite Lower Revenue
Adjusted EBITDA reached R$346.1 million in the quarter, down 10.3% year-on-year, while the margin expanded to 67.2% from 52.1%. For the nine-month period, adjusted EBITDA rose 7.7% to R$1.02 billion.
Net revenue declined 30.4% in the quarter to R$515.3 million, reflecting lower volumes and reduced sugar commercialization. In the nine-month period, net revenue edged down 1.4% to R$1.66 billion.
The company processed 7.08 million metric tons of sugarcane in the first nine months, a 10.1% drop from a year earlier, as adverse weather conditions reduced agricultural productivity.
Ethanol Mix Offsets Sugar Weakness
During the quarter, 65.8% of output was allocated to ethanol and 34.2% to sugar, reflecting management’s decision to favor biofuel amid stronger pricing dynamics.
Total ethanol production fell 7.3% in the quarter to 61,300 cubic meters, while sugar output dropped 32.5% to 51,700 metric tons. For the nine-month period, ethanol production decreased 13.2% and sugar output declined 5.3%.
Ethanol sales volumes in the quarter reached 75,300 cubic meters, down 9.1% year-on-year. Anhydrous ethanol sales increased 35.3%, while hydrous and organic ethanol rose 18.6%.
Gross revenue from anhydrous ethanol in the nine-month period climbed 48.0% to R$270.9 million, with average prices at R$3.27 per liter.
Hedge Strategy Bolsters Financial Result
Jalles’ hedge operations contributed positively to earnings. Hedge gains, including mark-to-market and settlement effects, totaled R$41.9 million in the quarter and R$267.3 million in the nine-month period, up 182.4% from a year earlier.
The company said it maintains a conservative hedging strategy. For the next crop, 336,000 tons have been fixed at an average price of R$2,475 per ton, with about 75% of the available volume hedged.
Sugar Prices Under Pressure
Average realized sugar prices declined 12.8% in the quarter to R$2,482.85 per ton, amid higher global supply and increased production in India.
Organic sugar gross revenue in foreign markets rose 30.0% in the nine-month period to R$217.4 million, partially offsetting weaker VHP pricing.
Cash Position and Debt
Cash and equivalents stood at R$2.06 billion at Dec. 31, covering short-term debt 3.8 times and ensuring amortizations through the 2029/30 crop.
Net debt totaled R$1.83 billion, with net debt-to-EBITDA at 1.2 times on a last-twelve-month basis.
Free cash flow for the nine months was positive at R$86.9 million, up 21.3% year-on-year, supported by improved operational cash generation.