By Brazil Stock Guide – Moody’s Ratings placed Raízen S.A. and Raízen Energia S.A. under review for downgrade after warning that the company’s planned asset sales, capex cuts, dividend reductions and debt management efforts — including a potential equity raise discussed between shareholders Shell Plc (Aa2 stable) and Cosan S.A. (Ba2 negative) — may not be sufficient to preserve the company’s Baa3 investment-grade rating unless credit metrics improve materially.
The review reflects ongoing operational challenges from the 2024–25 harvest, marked by negative free cash flow, higher gross leverage and strained credit indicators. Raízen’s total debt, including leases, reached R$72.5 billion ($13 billion) in June 2025, translating into Moody’s adjusted gross leverage of 7.7x EBITDA — or 5.9x excluding FX and fair value effects. Moody’s expects leverage to approach 5.3x by March 2026, if debt levels remain unchanged.
The agency noted that Raízen has been working since 2024 on a broad restructuring plan to improve efficiency and cash generation, but stressed that the company needs to maintain strong and consistent metrics to mitigate exposure to volatile commodity markets. The sugar-ethanol segment, which requires high capital expenditures and faces weather-related risks, remains particularly vulnerable, with weak sugar and ethanol prices expected through 2026–27 due to rising corn ethanol supply.
Raízen’s Baa3 rating currently sits two notches above the Ba2 outcome indicated by Moody’s Protein and Agriculture methodology, reflecting both its scale and the implicit support from its controlling shareholders. Still, the agency highlighted that persistent negative free cash flow and high investment needs — especially from its second-generation ethanol projects — have weakened its capital structure.
Formed in 2011 as a joint venture between Shell and Cosan, Raízen operates 29 sugar-ethanol mills and three 2G plants, with a crushing capacity of 75 million tons and revenues of R$255 billion ($45.6 billion) in the 2024–25 harvest. The company also runs Shell-branded fuel distribution, Brazil’s second-largest downstream operator. Moody’s estimates revenues of R$215 billion and EBITDA of R$13.2 billion for the 2025–26 cycle.
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