Cosan, Brazil’s largest sugar and ethanol producer, aims to raise as much as 10 billion reais ($1.9 billion) in a public offering to address its increasing debt burden.
However, CFO Rodrigo Araujo stressed on Monday that none of the funds will be used to help Raizen, Cosan’s joint venture with Shell that has struggled with bad sugarcane harvests and declining results.
Araujo, speaking on an investors’ call, made clear that the totality of the capital raised would go to de-leveraging Cosan’s balance sheet.
Although Raizen is a top player in the energy sector in the region, its recent challenges were part of the reason behind the drop in profitability registered by Cosan, especially in the sugar and ethanol markets.
Key investors to support Cosan’s debt restructuring
BTG Pactual Holdings will provide significant support for the proposed capital raising, with an investment of 4.5 billion reais.
Furthermore, the Perfin Infra Fund will invest 2 billion reais in the endeavour.
Rubens Ometto, the creator of Cosan, will contribute 750 million reais to the raising through his family office.
This restructuring program intends to lower Cosan’s corporate debt by 57%, which is an important step toward stabilising the company’s finances in the face of continued challenges in critical areas.
The financial injection is part of a bigger drive to streamline Cosan’s operations, which includes leadership transition planning.
Ometto, or a replacement nominated by him, is expected to serve as chairman for at least the next six years, ensuring continuity during the reform process.
Cosan shares tumble as investors react to capital raise announcement
Despite the strategic nature of the capital expansion, Cosan’s stock has come under intense pressure.
Shares of Cosan fell 20.53% on Monday, trading at R$5.96 as of 10:25 a.m.
This steep decrease follows the disclosure of the debt reduction plan and reflects the market’s doubts about Cosan’s capacity to overcome its current difficulties.
Investors are particularly concerned about Raizen’s poor performance, which has been hampered by low sugarcane harvests.
This has exacerbated the company’s financial troubles, and Brazil’s persistent high-interest-rate environment has further reduced profit margins.
Despite efforts to strengthen the balance sheet, Cosan’s inability to turn around its core operations has investors concerned about its recovery prospects.
Leadership succession and long-term strategy amid financial turmoil
In addition to addressing the company’s debt, the capital raising paves the way for leadership changes at Cosan.
According to the company’s official presentation, founder Rubens Ometto or a successor picked by him would serve as chairman for the following six years.
Long-term leadership stability is intended to help the organisation navigate a difficult phase and position it for future success.
Cosan recorded a net debt of 17.5 billion reais ($3.3 billion) at the end of June, a figure that had remained consistent since the first quarter.
Although the company’s finances are in turmoil, the current restructure is a key step toward restoring financial health and investor trust.
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