Raízen (RAIZ4) Long-Term Investment Analysis for Foreign Investors

Business Overview and Segmentation

Raízen S.A. (RAIZ4) is a leading integrated energy company in Brazil, operating across multiple segments of the fuel and renewable energy value chain. Formed as a joint venture between Brazilian conglomerate Cosan and global oil major Shell, Raízen has grown into one of the world’s largest sugarcane processors and ethanol producers as well as a major fuel distributor . The company’s diversified business portfolio spans:

• Sugar & Ethanol Production (Renewables): Raízen crushes sugarcane (over 78 million tons in 2024/25 ) to produce sugar (5+ million tons/year) and ethanol (3.1 billion liters, including advanced biofuel) . This makes Raízen one of the world’s largest sugar producers and the leader in ethanol in Brazil, supplying biofuel for the domestic market’s flex-fuel vehicle fleet and for export . The sugar & ethanol segment (often termed “Renewables”) also includes cogeneration of electricity from sugarcane bagasse, second-generation ethanol (cellulosic ethanol from cane residues), biogas, and other bioproducts .
• Fuel Distribution (Marketing & Services): Raízen is one of Brazil’s largest fuel distributors, with a network of over 8,000 Shell-branded service stations across Brazil . It distributes gasoline, ethanol fuel blends, diesel, and aviation fuel to retail customers (through gas stations and convenience stores), airports, and industrial clients . Raízen operates the Shell license not only in Brazil but also in Argentina and Paraguay, making it a regional downstream player . This segment, called Marketing & Services, contributes the bulk of Raízen’s revenue (fuel sales in Brazil alone were on the order of R$148–166 billion annually in recent years) , albeit at low margins typical of fuel retailing.
• Proximity Retail (Convenience): Through a partnership with FEMSA’s OXXO chain, Raízen operates convenience stores at its service stations (under OXXO and Shell Select brands) . This retail arm complements fuel sales and is focused on capturing non-fuel revenue from the huge daily foot traffic at Shell stations. It’s a growing segment aimed at boosting profitability per site by offering convenience products and services.
• Energy Trading & Other Services: Raízen engages in trading of energy products, leveraging its integrated supply chain. The company trades ethanol and sugar in international markets and manages logistics to optimize sales between domestic and export markets . It also trades electric power (via its bioenergy generation) and even lubricants – Raízen is the authorized distributor of Shell lubricants in Brazil, serving automotive, industrial, and marine sectors . These trading and ancillary activities round out Raízen’s portfolio, allowing it to capitalize on market opportunities and maximize the value of its production. Notably, in FY2024/25, trading operations underperformed due to market conditions, contributing less to profits amid a competitive environment .

Overall, Raízen’s vertically integrated model – from cultivating sugarcane and producing biofuels to distributing fuels at retail – gives it a unique positioning in the energy sector. The company operates in Brazil and Argentina with over 40,000 employees, and its diversification across biofuels, fossil fuel distribution, and renewable power provides multiple revenue streams . This breadth helps Raízen tap into growth opportunities in different areas of the energy market , though it also means the business is exposed to a wide array of market forces (commodity prices, weather, consumer demand, etc.), as discussed later.

Financial Performance

Scale and Revenues: Raízen’s revenues are among the highest of any Brazilian company due to the sheer volume of fuel it handles. Annual net revenue has been on the order of hundreds of billions of reais (for example, fuel distribution in Brazil and neighboring countries exceeded R$190 billion in FY2022) . In the fiscal year 2024/25 (year ended March 31, 2025), consolidated revenue was roughly R$250 billion (estimate based on segment data), reflecting robust fuel sales and commodity prices. However, high revenues have not translated to high profits – margins are thin in fuel retailing and were further pressured in the past year. The gross margin was only about 4.6% (TTM) , and EBITDA margins fell into the mid-single digits. According to Fitch Ratings, Raízen’s EBITDA margin in FY2025 dipped below 5%, versus a target to recover to ~6% by FY2026 . This squeeze is evident in recent results: in the Jan–Mar 2025 quarter, Adjusted EBITDA fell 53% year-on-year to R$2.0 billion amid cost pressures and lower volumes, missing analyst forecasts.

Profitability and Net Income: Raízen’s profitability has been under strain. The company posted a net loss of R$3.0 billion in Q4 FY2024/25 (Jan–Mar 2025), which was a sharp deterioration from a R$879 million loss a year prior . This marked the second consecutive quarter with >R$2 billion in losses . For the full fiscal year, Raízen was likely around breakeven or in the red, as reflected in a trailing net profit margin of -1.67% . Return on Equity (ROE) has consequently turned deeply negative (~-20% TTM) . The poor results were driven by both external and internal factors:

• Operational Challenges: A severe drought and wildfires in 2024 reduced sugarcane supply by ~7%, causing a 30% drop in cane crushing in Q4 and forcing a shift to ethanol (since sugar production was constrained) . Sugar sales volumes plunged 50% and ethanol volumes 15% in that quarter . Lower throughput also hurt bioenergy output (cogeneration of power fell to 1.94 GWh in the year) . This volume decline, combined with a competitive fuel market, crimped margins.
• Fuel Distribution Margins: In the fuels division, Raízen faced a “highly competitive” market with pricing pressure . Notably, margins in gasoline and diesel shrank compared to a prior high base period when temporary tax breaks had boosted profitability in 2023 . Once those tax credits ended and fuel taxes normalized, Raízen’s marketing margins were squeezed. The company had to engage in aggressive pricing to defend market share, which, along with higher logistics costs, eroded operating profit .
• Cost Inflation and Other Expenses: Brazil’s interest rates remained very high (Selic at 13.75%) in this period, inflating Raízen’s interest expense on debt . Additionally, the expansion into new projects (like second-gen ethanol plants) brought high depreciation and startup costs, impacting the bottom line. The result was an overall operating loss – Raízen’s trailing operating margin was about -0.65% , and net margins negative as noted.

Debt Profile: Raízen’s debt levels have climbed significantly following its growth investments and the recent earnings shortfall. Net debt ballooned to R$34 billion as of March 2025 , a 79% increase year-on-year. This pushed the company’s leverage ratio to 3.2× Net Debt/EBITDA, up from a comfortable 1.3× a year earlier . In other words, debt is now over three times annual cash EBITDA, which is high for a business with thin margins. Raízen’s debt-to-equity is also elevated (around 382% total debt/equity) , reflecting the heavy borrowing relative to its book capitalization. On the positive side, the debt is largely long-term – management indicates an average maturity over 5 years – and the company retains an investment-grade credit rating (Fitch rates Raízen’s senior notes BBB as of 2025). But the interest burden is significant: with Brazilian interest rates in double-digits, Raízen’s finance costs weigh heavily on profits. The high leverage has become a key focus for management and rating agencies. Indeed, reducing debt is now a strategic priority, as discussed later.

Return Metrics: With profits under pressure, Raízen’s return on assets is very low (ROA ~2% TTM) and ROE negative. Even on an adjusted basis excluding one-offs, returns have disappointed. In FY2024/25 Raízen generated roughly mid-single-digit percentage return on invested capital, below its cost of capital. This is expected to improve if and when the company’s efficiency measures take hold and the macro environment normalizes – for instance, Fitch projects EBITDA recovering to ~R$12–13 billion by FY2026 (versus ~R$10–11B in FY2025), which would help bring leverage down and returns up. Still, recent performance underscores that Raízen’s profitability can be quite volatile and sensitive to external shocks (weather, commodity prices, taxes), which is a critical consideration for long-term investors.

In summary, Raízen currently finds itself in a financial rough patch: huge revenues but slim margins, recent net losses, and a leveraged balance sheet. The company is responding with aggressive measures (cost cuts, asset sales, dividend pause) to stabilize finances. For investors, the key question is whether these issues are cyclical and fixable – with potential for a strong rebound in earnings – or indicative of structural challenges. We will explore the forward outlook, but first let’s review Raízen’s dividend track record, since many investors are interested in its income potential.

Dividend History, Yield and Payout Policy

Despite being a growth-oriented company, Raízen has paid regular dividends (and interest on capital) since its 2021 IPO. According to Brazilian corporate law, public companies must distribute at least 25% of annual net income to shareholders as dividends or interest on capital . Raízen’s bylaws align with this, ensuring shareholders receive a portion of profits in normal times. In practice, Raízen adopted a pattern of quarterly distributions – often via JCP (Juros sobre Capital Próprio), which is a tax-advantaged form of dividend in Brazil. These payouts were relatively modest per share but steady: for example, in calendar 2022 Raízen paid out roughly R$0.17 per share in total (through multiple installments) and in 2023 roughly R$0.26 per share, based on historical dividend records . While not large in absolute terms, those amounts did represent a respectable yield given Raízen’s share price.

At the current share price (~R$1.42), the trailing 12-month dividend yield appears very high – around 10–12% . This figure is somewhat misleading, however. It partly reflects the sharp drop in the stock price over the past year (which mechanically boosts the yield). More importantly, Raízen’s ability to continue paying dividends in the immediate future is in question due to its recent losses. In May 2025, the company’s new CEO suspended dividend payments entirely as part of an emergency plan to conserve cash . This means that, for now, Raízen is not paying a dividend, despite what the historical yield might suggest. Indeed, the “forward” dividend yield is near zero, unless and until the company returns to profitability and reinstates payouts. Investors should be cautious interpreting backward-looking yield figures like ~12% – that was based on past distributions which may not repeat in the near term.

Dividend Policy: Prior to this crisis, Raízen’s implicit policy was to distribute at least the minimum 25% of net income and sometimes more via JCP. The payout ratio had averaged around ~40–50% of earnings when the company was profitable . Distributions were typically “uneven” through the year – e.g. smaller interim JCP payments quarterly and a larger year-end dividend. One notable point for international investors is that Brazil does not levy withholding tax on dividends – dividends are paid net of corporate tax and received tax-free by shareholders in Brazil . (In Raízen’s case, any cash dividend is “full” to the investor since the company already paid income tax on its profits.) However, if Raízen pays JCP, those payments do incur a 15% withholding tax at source , because JCP is treated as a deductible expense to the company. Foreign investors also face the same 15% withholding on JCP. Over the past few years Raízen has used both mechanisms. For example, a large portion of its 2023 payout was via JCP in December 2023 (R$0.129 per share) .

Recent Developments: Given the net losses in FY2024/25, Raízen did not accrue any profit to distribute under the 25% rule. The management explicitly chose to halt dividends until the balance sheet improves . This is a prudent step to help fund operations and reduce leverage, but it does mean investors seeking immediate dividend income will need to be patient. Once earnings recover, we can expect Raízen to resume dividends, given its corporate governance commitments and the fact that its major shareholders (Cosan and Shell) likely appreciate some cash return over time. The timing, however, is uncertain – it depends on how quickly Raízen can restore profitability.

For now, foreign investors should view Raízen as a turnaround story rather than an income play. The historical dividend yield (~10%) is not a reliable indicator of forward yield . If and when Raízen’s fortunes improve (for instance, if EBITDA margins climb back toward mid-single-digits and net income turns positive), the stock could again offer a decent yield on cost along with capital appreciation potential. But in the short term, cash will likely be retained to pay down debt and fund critical projects. We will later discuss the taxation of dividends for international investors (Brazil’s rules are favorable currently), but it’s worth noting that any near-term returns from Raízen are more likely to come from share price recovery than from cash dividends.

Growth Outlook and Strategic Expansion Plans

Raízen’s long-term growth story is centered on both consolidating its dominant position in Brazil and expanding into new opportunities in renewable energy – albeit with a recalibration in the wake of recent setbacks. Here are the key components of its growth outlook:

• Refocusing on Core Strengths: After a period of rapid expansion (which included major acquisitions like the Biosev sugar mills in 2021 and forays into new businesses), Raízen’s management under CEO Nelson Gomes is now emphasizing a return to core businesses – namely sugar, ethanol, and fuel distribution . In mid-2025, Gomes stated that the company’s priority is to simplify operations and focus on its core competencies to “overcome their problems” . This implies a temporary pullback from peripheral ventures and a concentration on executing in areas where Raízen has competitive advantages (e.g. high-efficiency sugarcane production, nationwide fuel logistics). In practical terms, this strategy means improving operational efficiency at sugar/ethanol mills and fuel networks, cutting costs, and maximizing output from existing assets rather than aggressive expansion. For example, Raízen expects to process 72–75 million tons of cane in the 2025/26 harvest – still below its full potential of 100+ million if all mills ran at capacity, but the focus is on doing so profitably and sustainably .
• Completion of Key Projects (2G Ethanol Plants): Despite the overall belt-tightening, Raízen is moving forward with a couple of strategic growth projects that are near completion. Notably, the company is building two new second-generation (2G) ethanol plants (cellulosic ethanol facilities) in São Paulo state, adjacent to its cane mills. These plants, including one at Piracicaba, use sugarcane bagasse and straw to produce ethanol, boosting output without needing more cane. Management has prioritized finishing these 2G projects – allocating capex to ensure they come online – as they are seen as important to Raízen’s future growth and technological leadership . By focusing capex on just these core projects (Raízen cut overall capex ~18% for next year, down to ~R$9–9.8 billion, mainly to fund the 2G rollouts) , the company aims to start reaping returns from them by FY2026. The first 2G plant (Bonfim) is already operating – it’s the world’s largest cellulosic ethanol plant – though output ramp-up has been slower than hoped (production fell 16% last quarter) . Once the new plants are completed, Raízen will have significant 2G capacity, which could meaningfully increase ethanol production and revenue in coming years. This also positions Raízen to cater to emerging markets like sustainable aviation fuel (SAF): the company has already begun supplying 2G ethanol as a feedstock for SAF and received certifications (ISCC Corsia) for its low-carbon operations .
• Domestic Expansion – Fuel & Retail: On the fuel distribution side, Raízen continues to expand its network of Shell stations in Brazil and the region, albeit at a measured pace. The company has been growing its retail footprint through new station openings and conversion of independent stations to the Shell brand. Additionally, the OXXO convenience store rollout is a strategic expansion initiative: Raízen and JV partner FEMSA aim to open hundreds of OXXO stores at Shell gas stations in Brazil, modernizing the convenience offering and increasing ancillary sales. This is a growth avenue to improve per-site economics without heavy capital (OXXO often invests in the store build-out). Raízen is also expanding in mobility services – e.g. more Shell Select stores, and digital apps for payments/loyalty – to deepen customer engagement. While Brazil’s fuel demand is relatively mature, there is still room for growth in market share (e.g., capturing volume from smaller competitors) and in premium products (such as higher-margin premium fuels, lubricants, and convenience goods). In Argentina and Paraguay, Raízen likewise sees potential to expand its Shell-branded network and improve efficiency, given those markets are smaller but growing.
• International Opportunities: Currently, Raízen’s direct international operations are in the Southern Cone of Latin America (the Shell license in Argentina and Paraguay). Looking forward, the company could consider selective international expansion, particularly in areas related to its renewables expertise. For example, Raízen might export its 2G ethanol technology or partner on bioenergy projects abroad – possibly leveraging Shell’s global presence. There is growing demand worldwide for low-carbon fuels and Brazil has an exportable surplus of ethanol in some years. Raízen, as the largest ethanol producer, is well positioned to supply markets like Europe and Asia that seek to reduce transport emissions. The company already trades ethanol globally; a strategic expansion could involve establishing blending terminals or logistics partnerships in importing countries. Another angle is potentially expanding into other Latin American fuel distribution markets if opportunities arise (for instance, if Shell or another major divested downstream assets in a neighboring country, Raízen could be a buyer, replicating what it did in Argentina). While nothing concrete has been announced on that front, Raízen’s JV parentage (Shell’s global reach) could open doors for inorganic international growth in the medium to long term.
• Future Investments – Cautious but Present: Beyond 2025, once debt is under control, Raízen may revisit some growth investments it paused. For instance, Raízen had ambitious plans to roll out biogas (biomethane) plants at many of its sugar mills (as discussed in the ESG section). It envisioned dozens of biomethane units by 2030 , which could create a whole new revenue stream supplying renewable gas to industrial clients. That plan was slowed due to capital constraints , but it remains a promising growth avenue longer term, especially with growing demand for renewable natural gas. Similarly, Raízen had entered the solar energy (distributed generation) business, installing solar panels for commercial customers – a fast-growing market in Brazil. In July 2025, the company decided to sell 55 of its distributed generation solar plants for ~R$600 million to free up cash, a retreat from that expansion. However, Raízen could later re-enter utility-scale renewables or leverage partnerships (possibly with Cosan’s energy arm or others) once its finances improve. The sale indicates a short-term pullback, but the underlying market (solar power for corporate clients) is robust, and Raízen’s experience there could be revisited once core operations are solidly profitable.

In essence, Raízen’s growth outlook in the near term is about consolidation and efficiency – making the most of Brazil’s growing demand for fuel and energy while controlling costs – whereas the long-term vision remains one of expansion in renewables and international markets. Brazil itself offers growth through trends like increasing ethanol blending (e.g. potential moves to higher ethanol blends or ethanol in aviation), a recovering economy boosting fuel consumption, and the ongoing shift to renewable energy where Raízen is a natural leader. The key for Raízen will be to execute its strategic reset: streamline operations, reduce debt, complete the high-impact projects, and restore investor confidence. If it succeeds, Raízen could emerge as a leaner company ready to resume a growth trajectory – both at home and abroad – albeit in a more financially disciplined manner than before.

ESG and Sustainability Initiatives

Environmental, Social, and Governance (ESG) considerations are central to Raízen’s identity – the company positions itself as a leader in the energy transition, given its focus on biofuels and renewables. For foreign investors prioritizing sustainability, Raízen offers a mixed picture: on one hand, a core business (fuel distribution) is fossil-fuel centric, but on the other hand, Raízen’s renewable energy initiatives are substantial and impactful. Key ESG and sustainability aspects include:

• Second-Generation Ethanol (E2G): Raízen is at the forefront of cellulosic ethanol development. Traditional ethanol (first-gen) uses sugarcane juice, but second-gen uses cane residues (bagasse and straw), creating fuel from waste biomass. Raízen opened a landmark 2G ethanol plant at its Bonfim Bioenergy Park – the world’s largest cellulosic ethanol plant – and is building two more . These facilities turn agricultural waste into advanced biofuel, significantly improving the yield per hectare of cane and reducing overall carbon intensity. 2G ethanol can reduce lifecycle greenhouse gas emissions even further than first-gen ethanol and does not compete with food production. Raízen’s efforts here earned it ISCC certification for low indirect land-use change risk , underscoring the sustainability of its feedstock sourcing. While current volumes are small (only ~59 million liters of 2G ethanol produced in 2024/25) , the scaling up of these plants by 2026 will make Raízen a global leader in cellulosic biofuel. This positions the company to supply markets like aviation – indeed, 2G ethanol can be processed into Sustainable Aviation Fuel (SAF), and Raízen is already exploring this avenue with partners . The commitment to 2G is a long-term ESG play that could pay off by meeting the world’s growing need for low-carbon fuels.
• Bioelectricity and Biogas: Raízen maximizes the use of the sugarcane plant by burning bagasse (fiber) in high-efficiency boilers to produce steam and generate bioelectricity. The company is a significant producer of renewable power – in the last harvest it generated ~1.94 TWh of electricity from biomass, part of which is exported to the grid (this powers Raízen’s own operations and thousands of homes with green energy). Furthermore, Raízen (through a JV called Raízen Geo Biogás) is investing in biogas/biomethane projects. Its first commercial-scale biogas plant is operational in Guariba, São Paulo, digesting vinasse (a sugarcane ethanol byproduct) to produce biomethane . A second, larger biogas plant is under construction at Piracicaba (adjacent to the 2G unit) with 71,000 m³/day of biomethane capacity . Remarkably, Raízen had plans for 39 biogas plants by 2031 and 64 in the long-term , supplying renewable gas to industrial clients – for example, a supply contract is in place with Yara (fertilizer company) for green ammonia production and with Volkswagen for renewable gas usage . Biomethane from these plants can displace fossil natural gas, cutting emissions by >90% . While the full rollout may slow due to capital constraints, Raízen’s biomethane initiative addresses a critical decarbonization area (industrial fuel switching) and exemplifies a circular economy (turning waste into energy). It’s an ESG highlight that could become financially significant if carbon pricing or renewable gas mandates increase demand for biomethane.
• Solar and Distributed Generation: Raízen had entered the solar energy space by developing distributed generation (DG) projects – typically, small solar farms that provide power to corporate clients under Brazil’s net metering laws. This was in line with Brazil’s push for decentralized renewable power and gave Raízen a foothold in the electricity market beyond biomass. By mid-2025, Raízen had built 55 solar DG plants across various sites. However, as part of its refocusing, the company decided to divest these assets. In July 2025, Raízen signed deals to sell all 55 DG plants to specialist firms (Thoppen Energia and Grupo Gera) for a combined ~R$600 million . This sale helps Raízen raise cash and streamline operations. From an ESG perspective, the sale doesn’t reflect a repudiation of solar – it was more a financial decision – but it does mean Raízen will have a smaller direct role in solar power generation in the near term. The company may still pursue renewable energy via partnerships or larger projects once its balance sheet is healthier. It’s worth noting that Raízen’s parent Cosan has other subsidiaries focusing on natural gas distribution and may have renewable power projects, but Raízen itself will concentrate on bioenergy for now.
• Carbon Footprint and Emissions: As a major biofuel producer, Raízen’s products (ethanol, biogas, bioelectricity) contribute to lowering carbon emissions in transportation and power. Sugarcane ethanol in Brazil can reduce CO₂ emissions by ~70% compared to gasoline on a lifecycle basis. Raízen also participates in Brazil’s RenovaBio program, which issues carbon credits (CBIOs) for biofuels – providing extra incentive for ethanol production efficiency. The company likely generates a large number of CBIO credits which can be sold for revenue, linking financial performance with environmental performance. Additionally, Raízen’s operations are subject to environmental controls and it invests in sustainable agriculture (e.g. improving cane yields on existing land to avoid deforestation). The mention of Low LUC (Low Land-Use Change) Risk certification implies Raízen is careful to plant cane on degraded pasture or existing ag land, not new deforestation, a critical ESG consideration given concerns about land use in Brazil.
• Social & Governance: On the social front, Raízen provides employment for 40,000 people and has programs for worker safety, community development (especially in rural mill areas), and education. The company often highlights its training programs for mechanized harvesting (reducing manual labor in cane cutting, which historically had poor labor conditions) and partnerships with communities. Governance-wise, Raízen is publicly traded on the B3 Novo Mercado segment (one of Brazil’s highest governance tiers) – despite the ticker “RAIZ4”, these are ordinary shares with voting rights (the structure is a bit unusual but essentially all capital is common equity). The board includes representatives from Cosan and Shell as controlling shareholders, and independent members. Transparency is maintained via quarterly results in two languages and adherence to CVM (Brazil SEC) rules . From an investor standpoint, having Shell (a global company with its own stringent ESG commitments) as a 50% stakeholder likely enhances Raízen’s governance and sustainability focus, since Shell will expect high standards in safety, environmental compliance, and ethics.

In summary, Raízen’s ESG profile is strong on environmental initiatives – it is essentially an early mover in the low-carbon economy with its ethanol, biomethane, and bioelectricity, and these efforts differentiate it from traditional oil & gas peers. The main ESG trade-off is that a significant part of Raízen’s business is still distributing fossil fuels (gasoline, diesel). However, even there, Raízen can help decarbonize by promoting ethanol blending and possibly introducing EV charging at its stations in the future (a trend to watch). For investors, Raízen offers a way to invest in the energy transition in an emerging market, with real, tangible projects in renewable energy, albeit coupled with the realities of a legacy fuel business and current financial hiccups.

Comparison with Peers (Brazilian and International)

Raízen’s unique business mix makes direct comparisons tricky, but it’s useful to see how it stacks up against both Brazilian energy companies and international peers in the fuel and biofuel industry:

Brazilian Peers:

• Cosan (B3: CSAN3): Cosan is actually Raízen’s co-founder and largest shareholder (along with Shell). Cosan is a conglomerate holding company with a 44% stake in Raízen , plus other businesses (natural gas distribution, lubricants, agriculture, logistics). While not a “peer” in the sense of a separate competitor, Cosan is an alternative investment for those wanting exposure to Raízen. Cosan’s stock (also available as an NYSE-listed ADR, ticker CSAN) gives an investor an indirect stake in Raízen’s performance, along with a portfolio of other assets. Cosan tends to have more diversified cash flows and has historically had a more stable dividend (Cosan’s own dividend policy reflects its various income streams). However, Cosan’s fortunes are closely tied to Raízen – Raízen’s dividends to Cosan and overall valuation impact Cosan’s value. In terms of valuation, Cosan currently trades at a higher multiple than Raízen on earnings, partly due to those other businesses. Cosan may appeal to investors who want some Raízen exposure but with a bit less volatility, at the cost of not being a pure play.
• Petrobras (B3: PETR3/PETR4): Petrobras is Brazil’s state-controlled oil & gas producer and by far the largest energy company in the country. It is not a direct competitor in ethanol or sugar (Petrobras focuses on oil production, refining, and had spun off its retail fuel stations unit in 2019), but it’s a peer in the broader sense of energy investment in Brazil. Petrobras dwarfs Raízen in market cap and has had very high profitability recently due to oil prices – its net margins and ROE are in the double-digits, allowing Petrobras to pay extraordinarily high dividends (in 2022–23 Petrobras’ dividend yield exceeded 30% at times, thanks to a policy of distributing 60% of free cash flow). For an income-focused investor, Petrobras might seem attractive; however, Petrobras carries significant political risk (government influence on pricing and strategy) and its core business is fossil fuels with high carbon emissions. By contrast, Raízen offers a greener profile (biofuels vs. crude oil) and doesn’t face the same direct political interference (Raízen’s pricing of fuels is market-based, whereas Petrobras has faced government pressure to subsidize fuel). Raízen’s financial ratios, such as EV/EBITDA ~6× , are higher than Petrobras (Petrobras trades around 2–3× EV/EBITDA, reflecting its risk discount). And Raízen’s P/B (~0.9×) is also lower than Petrobras’ (~1.3×) in mid-2025, indicating Raízen might be relatively undervalued to book assets. Ultimately, Petrobras and Raízen cater to different investor appetites: Petrobras for high current dividend yield (but high volatility and carbon intensity), Raízen for a growth-cum-transition story with dividend potential in the future.
• Vibra (B3: VBBR3) and Ultrapar (B3: UGPA3): These two are Raízen’s main competitors in fuel distribution within Brazil. Vibra Energia is the former BR Distribuidora (spun off from Petrobras), operating the Petrobras gas station network. Ultrapar owns the Ipiranga brand of gas stations. Raízen (Shell Network), Vibra (Petrobras BR network), and Ipiranga together form the “big three” controlling the majority of Brazil’s fuel retail market. In comparison, Raízen has the advantage of vertical integration with ethanol production, whereas Vibra and Ultrapar buy all their fuels from refineries or producers. Financially, all three face similar low-margin dynamics in fuel retail. Vibra and Ultrapar have struggled in recent years with margin pressure too. Ultrapar’s Ipiranga, for instance, saw declining profits and has been restructuring. Vibra is now a standalone entity and has to source product at market prices (no longer subsidized by Petrobras). Raízen’s integration into sugar/ethanol might give it a leg up when biofuels are in high demand (it can supply its own ethanol to stations), but also exposes it to agri-commodity risk. Valuation-wise, these peers trade in the low single-digit EV/EBITDA range as well, and their stock performance has also been lackluster. One difference: Ultrapar and Vibra continue paying modest dividends even during down cycles, whereas Raízen has now paused – partly because Raízen is investing more heavily in growth projects than those peers. For an investor comparing them, Raízen offers higher growth potential (with its renewable projects) but currently higher leverage, while Vibra/Ultrapar are more pure-play distribution with arguably simpler business models.

International Peers:

• Shell PLC (LSE: SHEL / NYSE: SHEL): Shell is a 50% co-owner of Raízen and one of the largest oil & gas companies globally. As a peer, Shell provides an interesting contrast: it’s an integrated supermajor producing oil, gas, and refined products worldwide, but it also has a New Energies division investing in biofuels, renewables, and EV charging. Shell’s stake in Raízen is a cornerstone of its biofuel strategy – rather than produce ethanol itself, Shell chose to partner via Raízen. For foreign investors, Shell’s stock offers stability, a large market cap, and a dividend yield (~4% currently) backed by oil cash flows, with some exposure to Raízen’s upside (through equity earnings from Raízen). However, Shell’s performance is dominated by oil price fluctuations and global refining margins; Raízen’s specific issues (weather in Brazil, local fuel market conditions) barely move the needle for Shell. In terms of valuation, Shell trades around 5–6× EV/EBITDA and ~7× forward P/E – relatively low multiples due to the fossil fuel sector’s perceptions, but not as low as Raízen’s current implied forward multiples. Shell’s P/B is above 1.2× (since it’s profitable and buying back stock), compared to Raízen’s <1×. Essentially, Shell is a much lower-risk investment with moderate return prospects, whereas Raízen is higher-risk but potentially higher-return if it turns around (given Raízen’s much smaller size, a successful turnaround could mean outsized stock gains, whereas Shell will move more slowly). Also, on ESG, Shell is often under scrutiny as an oil major, while Raízen might appeal more to impact-focused investors due to its renewable angle – though Shell’s involvement in Raízen is a positive sign of Shell’s transition efforts.
• BP PLC (LSE: BP / NYSE: BP): BP is another oil major that has ventured into biofuels. Notably, BP operates a joint venture in Brazil similar to Raízen – BP Bunge Bioenergia, which is Brazil’s second-largest sugarcane processor after Raízen. That JV (with US agribusiness Bunge) produces sugar and ethanol, directly competing with Raízen in some regions. BP as a whole, like Shell, is huge and diversified. BP’s stock valuation and yield are comparable to Shell’s (dividend yield ~5%, P/E ~6–7). For an investor, BP provides indirect exposure to Brazilian biofuels through its JV, but that segment is a small part of BP’s overall business (so small it’s not separately listed). Raízen, on the other hand, is a pure play on Brazilian biofuels/energy. If one believes in the growth of Brazilian ethanol and renewable energy, investing in Raízen gives a more concentrated exposure to that theme, whereas BP gives a diluted exposure with the safety of an oil major’s cash flows. BP’s strategy also includes expanding renewable diesel and ethanol elsewhere, but Raízen is ahead in scale. Interestingly, BP’s Brazilian JV has faced similar weather issues but perhaps is financially less stretched (since it’s supported by BP). The peer takeaway: BP and Shell illustrate how major energy companies are participating in the space Raízen leads; however, neither Shell nor BP’s stock will reflect the ups and downs of the sugar/ethanol market as directly as Raízen’s does.
• Valero Energy (NYSE: VLO): Valero is a U.S.-based refining company and the world’s second-largest ethanol producer (after POET in the US; Raízen is the largest if counting only sugarcane ethanol). Valero operates 14 corn ethanol plants in the US and produces about 4 billion liters of ethanol annually – comparable in volume to Raízen’s ethanol output, though from corn feedstock. Valero’s main business is oil refining, which has been extremely profitable recently due to favorable fuel crack spreads. Thus, Valero’s financial profile is strong (high earnings, healthy dividends). Its EBITDA margins are much higher than Raízen’s (refining margins can be 15–20% vs Raízen’s sub-5% overall margin), so Valero’s stock trades at about 4× EV/EBITDA and a P/E ~5–6, reflecting the expectation of cyclical peak earnings. Valero’s dividend yield is ~3.5%. Comparing Valero and Raízen: Valero is a peer in ethanol by volume but has a very different business mix (mostly fossil fuel refining) and geography (U.S. market, with different dynamics for biofuel mandates). Raízen’s sugarcane ethanol has a lower carbon footprint than Valero’s corn ethanol, and Brazil’s market dynamics (flex-fuel cars, government blend requirements of 27% ethanol in gasoline) differ from the U.S. (where ethanol is ~10% blend with some push towards E15/E85). An investor might look at Valero as a way to play US liquid fuel demand and enjoy capital returns (Valero does large stock buybacks), whereas Raízen is a play on Brazilian domestic demand plus global biofuel growth. Notably, Raízen’s integrated model (producing sugar as well) gives it diversification Valero doesn’t have; on the flip side, Valero’s integration into refining yields far greater profitability per barrel than Raízen gets per liter of ethanol. In summary, Valero shows what a strong cash-generating fuel business can look like (given the right conditions), hinting at the kind of margins Raízen might aspire to in its ethanol operations if technology and markets improve (though refining and biofuel aren’t directly analogous).
• Other Peers: Internationally, one could also compare Raízen to pure biofuel companies or agri-commodity firms: e.g., Green Plains (NASDAQ: GPRE) in the US (corn ethanol producer turning to bio-refining), or European firms like Nordzucker or Tereos (sugar producers with ethanol segments). These peers are either much smaller (Green Plains) or not publicly traded (Tereos is coop, though Tereos had large Brazilian operations). In the renewable energy space, companies like Neste Oyj (Finnish renewable diesel producer) might be considered analogous in the sense of producing cleaner fuels – Neste focuses on diesel/jet fuel from waste oils, whereas Raízen focuses on ethanol from cane. Neste has very high margins and a rich valuation (EV/EBITDA >10), highlighting how investors reward successful renewable fuel businesses. Raízen, by contrast, has yet to translate its renewable portfolio into high profitability, but if it did, one could argue it deserves a re-rating closer to those peers.

Overall, compared to both its Brazilian and international peers, Raízen’s stock is trading at depressed levels, reflecting its recent difficulties. Its Price-to-Sales ratio is around 0.06 (extremely low, but a function of its high revenue/low margin model) , and its Price-to-Book is under 1 (roughly 0.8–0.9x) indicating the market values it below the accounting value of its net assets. Peers like Shell and BP trade near book value or above; Petrobras is around book; even Ultrapar trades near 1× book. This suggests investors are quite pessimistic about Raízen’s current ROE and ability to realize the value of its assets. The upside to this comparison is that any tangible improvement in Raízen’s operations could lead to outsized gains – there’s a lot of headroom for multiples to expand if confidence returns. The downside is that Raízen must prove it can overcome its issues to avoid being a “value trap.” The next section will delve more into valuation metrics and investor sentiment to flesh this out.

Valuation Multiples and Investor Sentiment

As of mid-2025, Raízen’s valuation reflects its distressed earnings but also embeds potential for recovery. Key valuation multiples and market sentiment indicators are:

• P/E (Price-to-Earnings): On a trailing basis, Raízen’s P/E is not meaningful because earnings are negative (loss over the last 12 months). If we consider forward estimates, the consensus expects a return to profitability in the coming year, but even so the forward P/E might be high (or still undefined) depending on how quickly net income normalizes. For instance, with an EPS of -R$0.25 in the latest quarter and analysts previously forecasting a small profit, it’s clear the reality undershot expectations. Thus, many analysts have likely slashed near-term EPS forecasts. It’s reasonable to say Raízen is trading at a discount to its historical P/E range – when it was profitable in earlier years, it traded around, say, 15–20× earnings. If Raízen can achieve, hypothetically, R$0.10 EPS in a future year, the current price of R$1.40 would be 14× that – but this is speculative until we see actual earnings improvement.
• EV/EBITDA: Enterprise Value to EBITDA is a useful metric for a heavily leveraged, asset-intensive firm like Raízen. According to Yahoo/Reuters data, Raízen’s EV/EBITDA (ttm) is about 6.2× . This is in a mid-range: not extremely cheap (some Brazil peers trade 4–5×) but lower than many renewable fuel peers globally. It’s important to note that Raízen’s EBITDA in the TTM figure includes some quarters that were relatively weak; if one believes EBITDA can rebound to, say, R$14–15 billion annually (as Fitch forecasts for a normal year) , then the forward EV/EBITDA would be closer to ~4× – which would appear very undervalued for a company with Raízen’s assets and market share. However, that hinges on hitting those targets. The multiple of ~6× indicates the market is uncertain about near-term EBITDA growth. Any positive surprise (e.g., better margins or a good harvest boosting ethanol output) could lead to a re-rating.
• Price-to-Book (P/B): Raízen’s P/B ratio is around 0.8–0.9× (below 1) , implying the stock trades for less than the accounting value of its net assets. This suggests investors either doubt the profitability of those assets or fear the book value might be overstated/at risk (due to potential write-downs in a crisis). For context, Raízen has a huge asset base: large-scale plants, inventories, etc., and book value was high following the merger of Cosan’s and Shell’s assets and acquisitions like Biosev. A sub-1 P/B is not unusual for Brazilian commodity-related firms during down cycles (for instance, sugar/ethanol mills historically have traded below replacement cost at cycle troughs). If Raízen’s returns on equity remain negative or low, P/B could stay depressed. Conversely, should ROE improve to even high single digits, a P/B closer to 1.0–1.2× could be justified. The low P/B also indicates a margin of safety in theory – if Raízen were to liquidate or break up, there’s potentially more value in its parts than the market cap suggests (especially since hard assets like mills and fuel terminals could fetch decent prices, as evidenced by Raízen’s asset sales like the Leme sugar mill for R$425 million ).
• Price-to-Sales (P/S): As mentioned, the P/S is extremely low (~0.05–0.06). This partly reflects the nature of the business (high sales, low margins) and is not as directly comparable to other sectors. But it does highlight that investors are paying only a few cents for each dollar of revenue Raízen generates. If Raízen can improve its net margin even slightly, the leverage on that P/S could be huge for equity value. For example, going from a net margin of -1% to +1% on R$200+ billion of revenue would swing R$4 billion to the bottom line, which is significant relative to a R$18 billion market cap.
• Investor Sentiment: Market sentiment towards Raízen has been quite bearish in the past year. The stock price has fallen approximately 48% over 12 months , erasing about R$19 billion in market capitalization . This plunge indicates disappointment and frustration from investors as earnings missed even pessimistic targets and leverage spiked. However, there are signs of optimism among analysts and possibly value-focused investors:
  • According to a compilation on Investing.com, 14 analysts cover Raízen with an overall “Buy” consensus – 11 Buy recommendations, 3 Hold, 0 Sell . The average 12-month price target is R$3.12 per share , which is more than double the current price (an implied +124% upside) . This bullish target suggests that analysts (who likely take a longer view through the cycle) see the stock as deeply undervalued assuming the company can right the ship. They are effectively pricing in a successful turnaround and a return to historical EBITDA levels.
  • It’s worth noting these targets might not have fully adjusted after the latest earnings miss, but even if trimmed, there is a considerable gap between market price and analyst expectations. This positive sentiment from analysts could be due to Raízen’s market leadership and asset quality – the belief that once temporary issues (drought, high interest, integration of new assets) are resolved, Raízen’s earnings power will show through.
  • Investor composition: Raízen’s float is not very large (with Cosan and Shell holding ~88% combined). The public float includes many institutional investors (pension funds, ESG funds, etc.) who might be in for the long haul. This could mean the stock, while beaten down, might not fall indefinitely because a core set of investors (and the parent Cosan) believe in its long-term value. In fact, Cosan itself might take actions to unlock value if the market undervalues Raízen persistently (e.g., there has been speculation whether Cosan could increase its stake or push for corporate actions if things don’t improve).
• Recent Market Reactions: After Q4 FY24/25 results (the big loss), Raízen’s stock dropped sharply to all-time lows around R$1.40. The market reacted negatively to the dividend suspension and the acknowledgement of missteps. However, once the bad news is fully priced in, the stock could stabilize. Any good news – such as a quarter with positive earnings, an asset sale that reduces debt more than expected, or a decline in Brazilian interest rates (which is anticipated in late 2025) – could serve as a catalyst for a re-rating. Essentially, sentiment is near a nadir, which contrarian investors often view as an opportunity if the fundamentals show any sign of turning.

In conclusion, Raízen’s valuation metrics indicate a company priced for trouble, but with significant upside if performance improves. The stock is cheap relative to sales and assets, and even on a normalized EBITDA basis it appears undervalued. The main caution is that “cheap can always get cheaper” if losses were to continue or if the company had to dilute equity (there’s no indication of an equity raise now, but extreme leverage could raise that specter if things worsened – currently, management is addressing debt via cost cuts and asset sales instead ). So far, equity holders have been diluted only through falling share price, not issuance. The analyst community still leans positive on Raízen, seeing these lows as an overreaction. Foreign investors considering Raízen should weigh this value proposition against the risks discussed – which include macro and currency factors.

Currency and Macroeconomic Risks

Investing in a Brazilian company like Raízen entails certain currency and macroeconomic risks that foreign investors must consider, as these can significantly impact both dividends and capital appreciation in USD or other home currencies:

• Currency Risk (BRL/USD): Raízen’s stock and dividends are denominated in Brazilian reais (BRL). Foreign investors will see their returns affected by exchange rate fluctuations. The Brazilian real can be a volatile currency, influenced by commodity prices, domestic interest rates, and political developments. For example, if the BRL depreciates against the USD by 10%, a U.S. investor’s returns (in USD terms) would be 10% lower, all else equal. In recent years the BRL has ranged roughly between 5.0 and 5.5 per USD, but it has seen much larger swings historically. The interplay of Brazil’s high interest rates (which tend to support the currency) and periodic risk-off capital flows (which hurt it) means FX is a real consideration. It’s quite possible that a significant portion of the equity upside case for Raízen could come from BRL appreciation if Brazil’s economy and governance strengthen. Conversely, a weakening real could erode local stock gains. Hedging currency risk is an option some investors use, but it can be costly given Brazil’s interest rate differential.
• Interest Rates and Inflation: Brazil’s economy has been in a high interest rate regime (Selic at 13.75% through early 2025) to combat inflation. High rates have multiple effects:
  • They increase Raízen’s borrowing costs, as much of its debt is Brazilian real-denominated. This was evident in FY2025 where interest expense rose, contributing to net losses . If high rates persist, Raízen’s earnings will continue to face pressure from financing costs. The silver lining is that Brazil’s inflation has been easing and the central bank is expected to start cutting interest rates in late 2025. A downtrend in rates (e.g., from 13.75% to perhaps 10% or lower over the next year or two) would reduce Raízen’s interest burden on floating-rate debt and also potentially boost economic activity (fuel demand) and equity valuations generally. So interest rate moves are a key macro swing factor.
  • High domestic interest rates also make local fixed-income more attractive relative to stocks, which likely contributed to selling pressure on equities like Raízen – investors could get double-digit yields in government bonds with less risk, so appetite for a struggling stock waned. As rates fall, some of that capital might flow back into stocks.
  • Inflation affects Raízen’s costs (e.g., labor, transportation, maintenance). Brazil’s inflation was elevated but has been moderating to single digits. Persistent inflation could squeeze margins if Raízen cannot pass on cost increases to customers due to competition.
• Commodity Prices: Raízen is exposed to multiple commodity markets – chiefly sugar, ethanol, and oil (fuel). Global sugar prices have been relatively high recently (over 20 cents/lb) which benefits Raízen’s sugar segment, if it has the production to sell. Conversely, if sugar prices drop significantly, Raízen’s sugar revenue would fall. Ethanol prices in Brazil are linked partly to gasoline prices (oil) and partly to sugar economics. Oil price volatility can indirectly impact Raízen: when oil (and thus gasoline) prices are high, ethanol becomes more competitive as a fuel and can be sold at higher prices (supporting Raízen’s margins). When oil prices crash, gasoline becomes cheap and ethanol producers may suffer to compete or see demand shift. Additionally, government policy on fuel pricing (see below) can distort this relationship. At present, with energy transition policies globally, there is a scenario where oil demand might plateau, but in the medium term oil price swings remain likely. Raízen hedges some commodity exposure via trading, but cannot eliminate it entirely.
• Government Policy & Regulation: The Brazilian government can significantly affect Raízen’s industry. One example was in 2022–2023 when the government temporarily cut federal taxes on gasoline and ethanol to fight inflation. This had complex effects: it initially made gasoline cheaper (hurting ethanol’s price advantage), but the government compensated ethanol producers with tax credits (which in 2023 boosted Raízen’s margins until those expired) . In 2023, the new government reintroduced fuel taxes, which normalized the market but also changed price dynamics. Looking ahead, policies such as Brazil’s ethanol blending mandate (currently gasoline is E27, containing 27% ethanol) are crucial – any change to blending requirements would affect demand. The mandate has broad support in Brazil for energy security and farm support reasons, so reduction is unlikely; if anything, there is talk of increasing ethanol use (e.g., implementing E15 gasoline in countries that import Brazilian ethanol, or supporting flex-fuel). Still, investors should monitor policy signals. Another area is price controls: historically, Petrobras sometimes held gasoline prices artificially low (under government pressure) which could hurt ethanol competitiveness. The current Petrobras pricing is more market-based, but under a more interventionist administration this risk can resurface.
• Climate and Environmental Risks: As seen in 2024, extreme weather events pose a risk. Droughts, floods, or frosts can drastically affect sugarcane yields. Wildfires (like those in 2024 that burned cane fields) are another risk exacerbated by climate change trends . Such events can reduce Raízen’s feedstock and throughput, hurting revenues and raising unit costs. While agriculture has good years and bad, climate volatility seems to be increasing, making harvest outcomes less predictable. Raízen mitigates some of this with insurance and geographic diversification of cane fields, but a severe multi-region drought (like 2014 or 2021) can hit the entire sector. Investors must accept agricultural risk as part of Raízen’s profile – which is a differentiator from, say, pure oil companies (they face reserve depletion risks but not crop failure).
• Brazilian Economy and Demand: Raízen’s fortunes are tied to Brazilian economic growth. When Brazil’s GDP is growing, industrial and consumer demand for fuel rises (trucking, air travel, personal vehicle use all increase). Conversely, during recessions, fuel consumption can stagnate or fall. For instance, Brazil had a deep recession in 2015-16 when fuel demand dropped. Currently, Brazil’s economy is modestly growing and the IMF even upgraded Brazil’s 2025 outlook , but high interest rates have been a drag. If Brazil enters a stronger growth phase with lower interest rates, Raízen stands to benefit from higher fuel volumes and possibly better pricing power. On the flip side, any major political instability or fiscal crisis in Brazil (not unheard of in the past) could weaken the real and hurt consumer spending, directly impacting Raízen’s sales. Additionally, longer-term, the push for electric vehicles (EVs) could start to dampen fuel demand growth late in the decade, although Brazil’s vast existing fleet of flex-fuel cars means ethanol will remain relevant for many years.
• Global Trade and Tariffs: Raízen exports sugar and some ethanol. Trade policies like import tariffs or quotas in destination markets affect these exports. For example, Europe and the US have at times imposed tariffs on Brazilian ethanol (to protect their producers) – any tightening could limit export opportunities. The EU’s renewable energy directives, U.S. biofuel policies, and even bilateral trade deals (e.g., with Japan or South Korea for ethanol) could create new markets or barriers. As of now, there’s growing openness to sustainable fuels, but trade remains a factor (e.g., India’s sugar export policies can influence global sugar prices heavily, affecting Raízen indirectly).

In summary, foreign investors in Raízen must navigate a multifaceted risk environment: currency swings can bolster or erode returns; Brazil’s domestic policies and macro conditions can heavily influence profitability; and global factors from oil prices to climate events add volatility. Diversification and risk management are key – some investors might choose to hedge FX or invest in Raízen as part of a broader portfolio to balance these risks. The flipside is that these risks come with potentially higher rewards: if Brazil’s macro picture improves (a strengthening real, economic growth, stable policy), an investor in Raízen could benefit doubly – from local stock appreciation and currency gains. Being mindful of these uncertainties is crucial for a long-term investor looking at both dividend income (when reinstated) and capital appreciation in Raízen.

ADR Availability and How Foreign Investors Can Invest

ADR (American Depositary Receipt): As of this writing, Raízen does not have a U.S.-listed ADR program. The company’s shares trade on the Brazilian Stock Exchange (B3) under the ticker RAIZ4. Despite the “4” usually denoting preferred shares in Brazilian tickers, RAIZ4 represents Raízen’s common stock (all shares have voting rights; the ticker choice was due to legacy reasons). There is no official ADR on the NYSE or Nasdaq for Raízen, and no widely traded OTC ADR either. The absence of an ADR means U.S. investors cannot buy Raízen through the typical ADR route on American exchanges.

However, foreign investors still have several ways to gain exposure to Raízen’s stock and business:

• Direct Investing via Brazilian Market: Many global brokerage platforms (and Brazilian brokers that cater to foreigners) allow investors to trade on the B3 exchange in São Paulo. To invest directly, a foreign investor usually needs to:
  1. Open an international trading account that has access to B3 (some U.S. brokers do, or one can use Brazilian brokers that support non-resident accounts).
  2. Obtain a Brazilian tax ID (CPF) and register as a foreign investor with the Brazilian authorities (often facilitated by the broker/custodian).
  3. Once set up, you can buy RAIZ4 shares in BRL just like a local investor.
  While this process has some upfront paperwork, it has become more streamlined in recent years. Platforms like Interactive Brokers, for instance, offer access to B3. The trading and settlement on B3 is modern (T+2 settlement, electronic, etc.), and foreign ownership of Raízen shares is allowed without restrictions (Brazil imposes no foreign ownership limit on this sector).
• Invest via Cosan’s ADR: An indirect way to get Raízen exposure is by investing in Cosan, which trades on the NYSE under ticker CSAN. Cosan owns 44% of Raízen , so roughly half of Cosan’s value is derived from Raízen (the other half comes from Cosan’s stakes in other businesses like natural gas utility Comgás, railroad logistics Rumo, etc.). Buying Cosan’s ADR gives you exposure to Raízen’s performance (if Raízen’s value rises, Cosan’s net asset value rises), and Cosan in turn is easier to access on U.S. markets. That said, Cosan’s stock may not move in lockstep with Raízen due to its conglomerate nature and holding company discount. For example, Cosan currently trades at its own depressed levels following Raízen’s fall, but Cosan also has its own dividend and financials to consider. Still, for someone who cannot or does not want to trade in Brazil directly, CSAN is a listed alternative that participates in Raízen’s long-term story.
• Brazil-focused Funds/ETFs: Raízen is included in some Brazilian stock indices (it’s not a Ibovespa heavy-weight but is part of broad indexes). International investors could gain exposure by investing in Brazil ETFs or mutual funds that hold Raízen. For instance, the iShares MSCI Brazil ETF (EWZ) or similar funds might have a small allocation to Raízen if it’s part of the MSCI Brazil index. However, as Raízen’s market cap has shrunk, its weight in such indices might be relatively small (a few tenths of a percent). Another angle: some Latin American or emerging market ESG funds might hold Raízen due to its bioenergy profile. Checking fund fact sheets for exposure to RAIZ4 would be necessary. This method gives only partial exposure and the performance will be diluted by all the other holdings.
• Corporate Bonds: Though not equity, it’s worth noting Raízen has issued international bonds (for example, a Luxembourg-issued 2027 note, and some green bonds) . Global fixed-income investors can invest in Raízen’s dollar-denominated bonds, which trade over-the-counter. These bonds offer exposure to Raízen’s credit (and indirectly to its success in deleveraging) and pay interest in USD. They could be an option for income investors who want a steadier coupon rather than the uncertainty of dividends. That said, bond investing involves different analysis (credit risk) and might not suit those looking specifically for equity upside.

In summary, while no direct ADR exists for Raízen, foreign investors are not without options. The most straightforward way for a long-term investor is to buy RAIZ4 on the B3 exchange via an international brokerage. With Brazil’s market infrastructure, foreign ownership is common (many institutional investors from abroad hold B3 stocks), and there are no foreign withholding taxes on capital gains or dividends for non-residents from tax treaty countries under Brazilian law (we’ll expand on taxation next). Thus, apart from the logistical step of setting up access to B3, investing directly can be efficient and you’ll receive any future dividends in BRL (convertible to your currency).

For those who prefer simplicity, Cosan’s ADR (CSAN) is a viable proxy with the caveat of being an indirect exposure. And for a diversified approach, Brazil ETFs/funds include Raízen to varying degrees. Each method has its pros and cons in terms of liquidity, fees, and purity of exposure. But fundamentally, Raízen is accessible to foreign capital, befitting its status as a major company in an important global industry (renewable energy).

Dividend Taxation and Regulatory Considerations for International Investors

Brazil has historically had a very investor-friendly regime for dividends, which is good news for foreign dividend seekers, though changes are on the horizon. Key points to understand:

• No Withholding Tax on Dividends (for now): Brazil is somewhat unique in that it does not tax dividends distributed by Brazilian companies to shareholders. Dividends are paid out of after-tax profits (the company pays corporate income tax, currently around 34% combined rate, on its earnings, then can distribute the net profit). The dividend received is net and tax-free in Brazil for both residents and non-residents . So if Raízen pays a dividend of R$1.00 per share, the full R$1.00 is remitted; unlike many countries, there is no 15-30% withholding at source. This has been a long-standing policy to avoid double taxation of the same income. For foreign investors, this means no Brazilian tax is taken out of your dividend – you would only be subject to any taxes in your home jurisdiction (for example, a U.S. investor would include the dividend in their taxable income and pay U.S. tax, but they wouldn’t lose a chunk to Brazil).
• Interest on Capital (JCP) Taxation: As discussed, Raízen often paid JCP (interest on equity) as part of its distributions. JCP is taxed differently: by law, companies deduct 15% withholding tax from JCP payments . So a R$0.10 JCP results in R$0.085 net to the shareholder after tax. This 15% is the final Brazilian tax; for a foreign investor, it can sometimes be reduced if a tax treaty applies (Brazil has some treaties, but notably not with the US – however, since Brazil had no dividend tax, treaties often don’t cover dividends). Practically, a U.S. investor would likely take the 15% Brazilian tax on JCP as a foreign tax credit against their U.S. taxes. For example, if Raízen paid R$0.10 JCP, the U.S. investor gets R$0.085, and they can credit that R$0.015 tax when filing U.S. taxes (subject to IRS foreign tax credit rules). JCP has been a common tool because it’s deductible to the company (saving corporate tax), but it became less popular after talk of tax reform (and companies like Raízen may shift to pure dividends going forward).
• Proposed Dividend Tax for Non-Residents: Brazil’s government (as of 2023-2025, under President Lula) has introduced tax reform proposals that would tax dividends distributed to individuals and foreign shareholders. One proposal (Bill No. 1,087/2025) suggests a 10% withholding tax on dividends to non-residents , potentially starting January 1, 2026. This is part of a larger overhaul aimed at aligning Brazil’s tax system more with global norms (since the zero tax on dividends is uncommon). If enacted, this means that foreign investors would see 10% of any dividend skimmed off by Brazil’s tax authority as of that effective date. For instance, a R$1.00 dividend would come with R$0.10 tax, and R$0.90 net would be paid out. Non-resident investors could possibly reduce this rate if a tax treaty stipulates a lower dividend withholding (some treaties Brazil has, e.g., with Japan or Netherlands, might cap dividend tax at 10% anyway – many at 15%, so 10% is relatively low). It’s important to note this legislation was under discussion and not finalized at last update, but the trend indicates that by the time Raízen resumes paying meaningful dividends, a withholding tax might exist.
• Tax on Capital Gains: Foreign investors classified under Brazil’s Resolution 4,373 (the mechanism allowing foreign portfolio investment) currently enjoy exemption from Brazilian capital gains tax on trades of stocks on the exchange, provided they are not from a “tax haven” jurisdiction . This means if you buy RAIZ4 at R$1.40 and sell later at R$3.00, Brazil will not charge capital gains tax on that profit for most foreign investors. (In contrast, Brazilian residents have to pay 15% CG on stock gains above certain thresholds.) This is a significant benefit – effectively Brazil incentivizes foreign investment by waiving CGT. Do verify your status with your broker; typically if you register properly as a foreign investor (non-haven), you qualify. If one is investing via an ADR or a U.S. vehicle, then it’s a moot point as you’d face U.S. capital gains tax rules instead.
• Repatriation and FX: Brazil has no capital controls restricting the repatriation of investment principal or dividends for foreign investors. After you sell a stock, you can freely convert BRL to USD and remit out (subject to normal exchange contract procedures). Dividends too can be paid abroad; often investors choose to receive them in BRL in their account and then decide when to convert (potentially timing the FX). The only cost is the exchange rate spread and possibly an IOF (financial operations tax) but that IOF on FX for foreign investment is generally zero for long-term investments (Brazil eliminated IOF on foreign equity inflows to encourage investment).
• Regulatory Framework: Raízen is governed by Brazilian corporate law and CVM regulations. Foreign investors have basically the same rights as Brazilian investors in terms of voting and receiving dividends. One nuance: attending shareholder meetings or voting might require issuing proxies or having a Brazilian representative, which institutional investors handle routinely. For retail foreign investors, this is usually not exercised, but major votes (like merger approval) would typically see Cosan/Shell deciding outcomes given their stake. That said, as an ordinary shareholder you are entitled to all disclosures in English (Raízen provides extensive info in English on its IR site and earnings calls in English ) and dividends/JCP are paid equally to all shares.
• Withholding on Interest (bond interest): If one invested in Raízen’s bonds, note that interest on bonds paid to non-residents is usually subject to 15% or 25% withholding unless it’s a specific exempt issuance. But equity dividends are the main focus here.
• Future Regulatory Changes: Besides dividend tax, Brazil’s broader tax reform might change consumption taxes, etc., which could indirectly affect Raízen (for example, if gasoline/ethanol taxes change, or if tax credits like those in 2023 are not repeated). But these are business considerations rather than investor taxation. One potential change specific to the sector: the government has mulled reinstating a fuel price stabilization fund or controlling fuel price swings – this could indirectly act like a tax on producers/distributors in some scenarios (though likely hitting Petrobras more). Additionally, any changes to RenovaBio (the carbon credit program) could affect revenue from selling those credits.

In summary, international investors currently benefit from Brazil’s favorable tax treatment of equity investments: no dividend tax (until reforms pass) and no capital gains tax for foreign portfolio investors. This means when Raízen does pay dividends, a foreign investor would get the full amount, which is quite attractive in comparison to investing in many other high-dividend markets (where 15-30% might be withheld). Going forward, it’s prudent to expect a 10% withholding on dividends from 2026, which is still relatively low. Investors should also be aware of their own country’s tax rules (for instance, U.S. investors can typically credit Brazilian taxes paid, and Brazil’s lack of withholding actually simplifies things as there’s often nothing to credit on dividends).

One should keep an eye on Brazil’s tax reform progress – if a dividend tax is enacted, Raízen’s after-tax yield for foreigners would effectively be a bit lower. Also, any corporate moves (like if Brazil ends the JCP system entirely, companies may shift all payouts to normal dividends). Lastly, ensure to use the proper channels to invest (the 4,373 structure via a broker) to claim the tax benefits; unregistered investments or those through certain vehicles might not get the same exemptions.

Regulatory environment for foreign investors in Brazil is generally welcoming: the country actively courts foreign portfolio capital, and legal protections are in place (Brazil is a signatory to various investor protection treaties, and its courts uphold shareholder rights reasonably well, though major disputes can be slow in the legal system). Raízen being on Novo Mercado means it voluntarily adheres to higher governance standards like tag-along rights (if control is sold, minority shareholders get 100% offer price tag-along) and arbitration for disputes. These measures should give comfort that foreign minority investors are not easily exploited – their main risks are market and economic, not expropriation or unfair treatment.

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Conclusion: Raízen (RAIZ4) presents a compelling long-term investment case for those seeking a combination of dividend income (in the future) and capital appreciation, but it comes with a complex mix of factors. On the positive side, the company has a diversified business model with leadership in biofuels and a dominant fuel distribution network, which position it to benefit from both Brazil’s economic growth and the global energy transition. It has historically returned cash to shareholders and, once its earnings recover, could resume healthy dividends – aided by Brazil’s still-favorable tax regime for dividends . Raízen’s valuation is currently depressed, offering value investors an entry at multi-year lows with the stock trading below book value and at a tiny fraction of sales. The long-term strategic initiatives in renewables (ethanol 2G, biogas, etc.) could unlock new revenue streams and improve margins, distinguishing Raízen from traditional oil & gas investments.

On the cautious side, the company is navigating a period of operational and financial headwinds, including recent losses, high leverage, and the suspension of dividends . The success of a Raízen investment will hinge on the execution of its turnaround plan: cost reductions, asset sales (like the solar plants and even a sugar mill) , and refocusing on profitable core operations . Macro factors – such as Brazilian interest rate cuts, stable policies, and normal weather – will also be critical tailwinds or headwinds. Investors should be prepared for continued volatility; this is not a “widows and orphans” stock at the moment, but rather a potentially rewarding investment for those who can tolerate some risk and have a multi-year horizon.

For foreign investors, Raízen offers a rare opportunity to invest in a renewable energy powerhouse in an emerging market. It’s an investment that aligns with themes of ESG (decarbonization) and emerging market consumer growth (fuel demand, convenience retail), all under one roof. While waiting for the thesis to play out, one can take comfort that corporate governance is solid (backed by Shell and Cosan’s oversight) and that once profitability is restored, Brazil’s policies should allow investors to reap the rewards with minimal friction (low taxes, etc.). As always, diversification is key – Raízen could complement a portfolio with exposure to developed-market energy stocks or other Brazilian equities, balancing its higher risk/reward profile.

In summary, Raízen’s current challenges appear to be fixable and largely cyclical , whereas its strengths – a large-scale integrated platform and a foothold in the future of energy – are structural. If one believes in the long-term demand for sustainable energy and Brazil’s role as an agricultural and bioenergy superpower, Raízen stands out as a primary vehicle to invest in that narrative. The road to value realization might be bumpy, but for investors with patience, Raízen offers a combination of high dividend potential (post-turnaround) and capital growth that could make it a rewarding component of a long-term portfolio.

Sources: Raízen Investor Relations FAQs ; MarketScreener Company Profile ; Rio Times report on Raízen’s Q4 2025 loss ; World Energy News/Reuters interview with Raízen’s CEO ; Investing.com and Digrin financial data ; TradingView/Reuters news on asset sales ; Bioenergy Insight on Raízen’s biogas projects ; Fitch Ratings forecasts (via news abstract) ; and Brazilian tax reform analysis , among others. These sources provide context and figures underpinning the analysis above, and all monetary figures are in Brazilian reais (R$) unless otherwise noted.

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