Raízen Stock Drops 5.88% as Drought and Fires Hit Sugar Production

Raízen’s stock (RAIZ4) took a significant hit on Monday, falling 5.88% to R$1.92 by 12:55 PM. The sharp decline came as investors reacted to the company’s third-quarter operational data for the 2024/2025 harvest season.

Raízen also announced the discontinuation of its financial guidance due to ongoing developments within the company. Itaú BBA analysts noted that sugarcane productivity and sugar conversion rates suffered from water deficits and forest fires.

This led to a 27% year-on-year decrease in crushing, resulting in lower-than-expected performance. Despite these setbacks, second-generation ethanol (E2G) production rose by 23% quarter-on-quarter, reaching 18.5 million liters.

The company’s sales volumes in Brazil dipped by 4% year-on-year, ranging between 6.8 and 6.9 million cubic meters. However, Latin American sales volumes saw a 3% increase compared to the previous year, reaching 1.9 to 2.0 million cubic meters.

Itaú BBA forecasts an adjusted EBITDA of R$3.375 billion for Raízen this quarter. Bradesco BBI analysts labeled the reported figures as negative, expecting the processed sugarcane to fall short of the anticipated 82 million tons for the agricultural year.

Raízen Faces Challenges

They also predict a sequential drop in EBITDA due to lower sugar and ethanol volumes, despite higher ethanol prices. The BBI team anticipates lower margins in Brazil’s fuel distribution sector for Q4 2024 compared to Q3 2024.

Raízen’s decision to halt regular operations at its Costa Pinto pilot plant for second-generation ethanol production adds another layer of complexity to the company’s current situation.

This move, coupled with the discontinuation of financial guidance, reflects the ongoing changes and challenges within the organization. Despite the current downturn, Itaú BBA maintains a buy-equivalent recommendation for Raízen.

The target price is set at R$4.50. However, Bradesco BBI expects Raízen’s EBITDA to reach R$13.8 billion for 2025, falling below the lower end of the previous projection range.

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