Economic-financial performance of the Brazilian sugarcane energy industry: An empirical evaluation using financial ratio, cluster and discriminant analysis

Abstract

This study is intended to characterize the economic and financial status of the sugarcane energy industry in Brazil, providing relevant information for new investors, directors of companies and government to make more appropriate decisions. The data used in the study was obtained from financial statements issued by about 150 plants in the 2014/2015 and 2015/2016 harvest seasons. Following the logic proposed by the approach known as financial ratio analysis, financial indicators were calculated to measure the liquidity, profitability and debt of the plants. A cluster analysis was applied to define representative groups of companies in the 2014/2015 harvest season and a discriminant analysis was used to classify companies in the 2015/2016 crop season. The results showed high heterogeneity in the industry, marked by the presence of four different groups of companies. The first group includes high-liquidity and low-debt units. The fourth group is characterized by companies with high debt, low liquidity and negative operating margins. The two intermediate groups are made up of plants with moderate leverage and liquidity, but with operational performance levels varying from high to low. It should be noted that higher revenues in the 2015/2016 harvest season made it possible to improve the financial performance of the companies, except of those with in the fourth group. The results indicate difficulties to expand production capacity in the short term, but also recovery possibilities in the medium and long term if market conditions are favorable and the institutional framework in the country's fuel industry is lasting and predictable.