Brazil’s Sugar Leader Raizen to Sell Assets, Cut Investments

Brazil’s largest sugar and ethanol maker Raizen SA is looking at potential asset sales and halting projects to build new plants in an effort to reduce debt after borrowing costs soared in the country.Most Read from Bloomberg

• The company, a joint-venture between Brazilian conglomerate Cosan SA and oil giant Shell Plc, is undergoing a “profound” portfolio revision, Chief Executive Officer Nelson Gomes told analysts during an earnings call Monday. Brazil’s central bank has increased its key rate by almost three percentage points since September to try to keep inflation in check.“The rapid increase in interest rates has brought us a considerable sense of urgency right now, so that we can take all necessary actions to bring the company back to a stable and balanced position,” Gomes said.Raizen shares have plunged more than 50% over the past year. The CEO didn’t disclose which assets would be offered for sale, but said the core businesses of sugar, ethanol and fuel distribution in Brazil and Argentina would remain the company’s focus. Raizen is also downsizing its trading arm, Gomes added . Chief Financial Officer Rafael Bergman said the company will only go ahead with two second-generation ethanol plants that are currently under construction, and will refrain from adding new projects that had been previously planned.
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• Raizen posted a fourth-quarter net loss of 2.6 billion reais ($456 million), compared with an average 365 million-real profit in analyst estimates compiled by Bloomberg. The company saw sugar production slump after some of its cane fields were hit by drought, and also booked a 618 million-real charge from “certain trading operations” involving futures contracts for sugar and ethanol.Raizen’s shares fell as much as 7.3% in early Sao Paulo trading on Monday, before shifting higher and gaining as much as 4.5% as investors mulled potential benefits of asset sales and lower spending.Balance sheet weaknesses and lack of clarity on a turnaround and deleveraging processes may undermine investor optimism in the short term, Itau BBA analyst Monique Greco said in a report. “In the long term, we believe the story offers an intriguing risk-reward proposition due to the potential outcomes of its just-begun turnaround process.”The company recently saw a series of leadership changes, with CEO Nelson Gomes taking the helm at the end of 2024. The change came as the Cosan conglomerate has been making efforts to reduce leverage. Bloomberg reported in November that Raizen considered the sale of a stake in its second-generation ethanol plants.