Raízen, the world's largest sugar producer and a joint venture between Shell and Brazilian industrial group Cosan, has, according to CNN Brasil, reported a quarterly net loss of R$15.6 billion (approximately $3.1 billion USD) and warned of "significant uncertainty" regarding its ability to continue operations.
The company, which also operates a vast network of fuel distribution, is grappling with R$55.3 billion in net debt and a leverage ratio of 5.3 times its EBITDA, according to its latest financial statements through December.
Sources close to the matter indicate that BTG Pactual, a fund manager that became part of Cosan's controlling shareholder group last year, proposed a strategic split of Raízen. The proposal suggests separating the fuel distribution business from other assets, allowing the fuel station unit to secure new capital from the bank.
However, this idea has met resistance from creditors who prefer to maintain the company's integrity to ensure a swift recovery. Creditors are reportedly pressuring shareholders to inject substantial new capital into Raízen.
Raízen, Cosan, BTG Pactual, and Shell have all declined to comment on the ongoing situation. Shell, however, reiterated its commitment to working with Raízen and Cosan to support the company's deleveraging efforts.
Brazilian President Luiz Inácio Lula da Silva recently convened a meeting with senior executives and government officials to address the financial crisis facing Raízen.
The meeting in Brasília included Raízen’s main shareholders, Cosan and Shell, as well as a senior executive from BTG Pactual. Government representatives reportedly present included Finance Minister Fernando Haddad and BNDES President Aloizio Mercadante. The discussions took place shortly before Carnival and Lula’s trip to Asia.
Days later, Raízen formally requested financial support from its major shareholders after another weak quarterly performance, intensifying negotiations to address its debt and liquidity challenges. Most parties declined to comment, while Petrobras President Magda Chambriard said she did not attend any meeting on the matter.
Raízen financial turmoil has sent ripples through the agribusiness sector, particularly among sugarcane suppliers. With the 2026/27 sugarcane harvest weeks away, independent producers supplying the company are closely monitoring the situation, expressing heightened caution about renewing contracts. Historically, these renewals were almost automatic, but now producers are considering alternatives, including spot market sales with immediate payment, to mitigate risks.
Raízen's decision to directly assume payment obligations to sugarcane growers, moving away from a bank-intermediated discounted risk model, has further amplified concerns among suppliers. While payments are currently up to date, the change increases suppliers' exposure should Raízen's financial health deteriorate.
The crisis at Raízen underscores broader anxieties within Brazil's corporate debt market, especially given the prevailing high interest rates, currently at 15%. Analysts note that even large corporations with strong banking relationships are struggling to manage debt servicing costs, with Raízen alone facing R$7 billion in annual interest payments. The potential for Raízen to seek judicial recovery could trigger a significant cascading negative effect on the Brazilian economy due to its sheer size and interconnectedness, potentially becoming one of the largest such cases in the country's history.
Market observers have noted a recent surge in sellers and a scarcity of buyers for Raízen and Cosan bonds in the secondary market, reflecting a widespread lack of confidence in the company's ability to recover. Despite ongoing negotiations with entities like BNDES and the involvement of its major shareholders, Raízen faces the daunting task of raising an estimated R$20 billion to stabilize its financial position by 2026.
The situation highlights the vulnerability of even essential sectors like fuel distribution and agribusiness to high interest rates, impacting investment, hiring, and overall economic expansion, despite recent positive inflation readings.
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