Shares of sugar maker Raizen hit record low, executives open to new partner

Brazilian sugarcane processor Raizen RAIZ4 admitted the possibility of a new shareholder after weak results, which caused the company's stock plunge to a record low on Thursday.

WHY IT'S IMPORTANT

Raizen, one of the world's largest sugar producers, is controlled by Shell SHEL and Brazilian conglomerate Cosan CSAN3. It faces operational challenges and high debt.

In a conference call following the results, executives said the company will face operational transformation and portfolio simplification in the next two or three years, which could be accelerated by a capital injection.

BY THE NUMBERS

Raizen reported a net loss of 1.8 billion reais ($333.12 million) for the first quarter of the 2025/26 crop year.

Core earnings fell 23.4% year-on-year to 1.89 billion reais, missing the 2.16 billion reais forecast by analysts polled by LSEG. Its leverage ratio jumped to 4.5 from 2.3 a year earlier, with net debt rising 55.8%.

WHAT'S NEXT

Raizen has been adopting measures to deal with a large debt load, including divestitures and shutting down a major mill. The firm's Chief Financial Officer Rafael Bergman told the call that divestitures should continue, with updates likely in the coming quarters.

Ongoing discussions include the possibility of a capital injection that could involve current or new shareholders, but there is still no certainty about whether this potential operation will take place, he said.

Newspaper Valor Economico reported later on Thursday citing sources that Raizen hired an investment bank to look for a new minority partner. The firm declined to comment on the report.

KEY QUOTES

"Obviously, this (potential operation) requires a degree of coordination with Shell and Cosan so that we can evaluate mechanisms to accelerate our journey and reduce execution risks in a plan that, from an operational standpoint, is quite clear and has a high degree of confidence in its success," Bergman said.

MARKET REACTION

Raizen's shares plunged as much as 15% to an all-time low, on track for their worst day ever during the afternoon. The stock was the worst performer on Brazil's Bovespa index IIBOV.

BTG Pactual analysts were unimpressed, saying Raizen's operational preview last month already indicated lower profitability amid lower yields and higher unit costs, along with maintenance stoppages at an Argentine refinery.

"With a net debt cost of 1.6 billion reais in the quarter (6.2 billion annualized), Raizen needs to accelerate the deleveraging process," they added.

($1 = 5.4034 reais)