Brazilian sugar-and-ethanol mills are changing hands near the bottom of their five-year valuation range as sugar prices hover close to production costs and elevated interest rates curb buyers’ appetite.
Transactions completed from 2022 through 2026 valued mills at $43 to $65 (220 to 330 reais) per metric ton of annual installed cane-crushing capacity, according to an industry report by Odilon Costa, head of research at Banco ABC.
Recent deals have clustered at the low end of that range, signaling that the sugar market’s previous upswing has run its course.
Raízen’s sale of the Caarapó mill to Adecoagro in July valued the asset at about $43 (217 reais) per metric ton of capacity. That was broadly in line with Viralcool’s January purchase of a Tereos mill at $43 (219 reais) per metric ton.
“The sector is in a downturn, and valuations reflect that,” said Fernando Soares, head of corporate finance at Czarnikow.
Soares estimated that transactions in recent years ranged from $43 to $74 (220 to 375 reais) per metric ton. Current valuations reflect both sugar prices near production costs and Brazil’s high interest-rate environment, he said.
Costa said deal multiples may also vary depending on a plant’s cogeneration capacity, asset quality, supply partnerships and the seller’s need for liquidity.
Deals struck when sugar prices were stronger commanded substantially higher valuations.
Zilor’s November 2024 acquisition of the Salto Botelho mill from Amerra valued the asset at about $66 (333 reais) per metric ton, according to FG/A analysts Cristian Quiles and Eloi Jacomini.
BP’s acquisition of Bunge Bioenergia in the same year implied a multiple of about $88 (448 reais) per metric ton.
A normalized market valuation tends to be around $60 per metric ton, Quiles and Jacomini said. Buyers may pay premiums when they expect stronger future cash generation or when a transaction includes assets beyond the industrial plant, such as grower contracts and investments made during the inter-harvest maintenance period.
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff
