(Reuters) - Quarterly profit more than doubled at Brazil's largest sugar exporter, Cosan , as the company produced less sugar and ethanol but enjoyed better prices for its main products.

A surge in ethanol export revenue more than offset a decline in sales of the cane-based biofuel in the domestic market and a drop in sugar sales at home and abroad.

"The ethanol we export is for industrial use, not fuel, and these are on long-term contracts, so we expect this performance to continue," Marcos Lutz, Cosan chief executive, said on a conference call with investors Thursday morning.

Net income at the country's leading cane sugar and ethanol group rose to 93.8 million reais ($54 million) in the fiscal third quarter ended Dec. 31 from 38.7 million reais a year earlier.

While revenue from sugar sales fell to 887.6 million reais from 931.9 million reais, total ethanol sales rose to 744.5 million reais from 647.7 million reais.

And ethanol exports surged to 264.4 million reais from 89.9 million reais. Domestic sales of ethanol fell to 480.1 million reais from 557.9 million reais.

Capital expenditures dropped to 453.3 million reais from 707.7 million reais, but the company's outlook remained largely unchanged for the full fiscal year.

Brazil's sugar and ethanol industry has been grappling with a shortfall in the cane crop that has left mills saddled with idle crushing capacity.

Analysts estimate the 400-odd mills in the region could crush 100 million more tonnes of cane than the roughly 490 million to 500 million tonnes from the last harvest.

Bad weather and poor investments in planting of cane resulted in the first drop in Brazil's output in a decade.

Shares of Piracicaba, Brazil-based Cosan were up 0.8 percent at 29.36 reais on Thursday.

Cosan's CEO said current prices do not reflect the supply and demand fundamentals of the global market. New York ICE sugar futures are trading at just under 25 cents a pound, down roughly 22 percent from late September.

"Prices should recover through the year (April-March)," said Lutz, adding that the company had replanted about 20 percent of its cane fields over the past year, which is above the market average for replanting. He said Cosan expects good results from crushing this year.

Cane plants need to be replanted about every four to five years. The root stock of the plant that is left to grow back after harvest every year will lose 15 to 20 percent of its yield potential per year, starting from the third or fourth year after it was replanted.

Brazil's cane sector needs to replant 18 to 20 percent of its cane crop every year, but mills have failed to keep up this pace since the 2008 financial crisis, which left many mills cash-poor. They could not afford to take a field out of production to replant it, especially with the high price of sugar over the past few years.

Cosan said it had no plans to seek new capital for now. Brazil's cane crop will begin harvesting around April.