Sucre Ethique - Cosan Drops on Concern Blacklist Loses Clients, Funds

Business Week - jeudi 7 janvier 2010

Cosan SA Industria & Comercio, the world’s biggest sugarcane processor, fell the most in eight months on concern that its inclusion on a list of companies whose workers operate in slave-like conditions will drive away clients and cut off access to funding.

Barra Bonita, Brazil-based Cosan was added to the list on Dec. 31, according to the Brazilian Labor Ministry’s Web site. Petroleo Brasileiro SA’s fuel distribution unit is considering “restrictions” against Cosan, according to a spokesman at BR Distribuidora who couldn’t be named because of company policy.

The incident that got Cosan on the list took place in 2007 with a third-party cane-cutter that no longer holds a contract, Cosan paid the workers and will appeal its inclusion, the company said in an e-mailed statement. Cosan dropped 6.3 percent to 23.23 reais in Sao Paulo trading at 1:05 p.m. New York time. It earlier slid as much as 7.8 percent, the biggest intraday decline since May 13.

“This inclusion on the government’s list is bad because public banks would have to cut investments, Petrobras would have to review contracts since it can’t do business with companies on that list,” said Erick Hood, an analyst at SLW Corretora in Sao Paulo.

‘Black List’

Cosan had about 715 million reais ($411 million) in financing from BNDES, as the national development bank is known, as of its fiscal second quarter, which runs from July to September. Cosan has a total of 5.3 billion reais in debt, according to the company’s Web site.

The so-called “black list,” created in 2004, is updated every six months, according to the Labor Ministry. The Ministry found and “liberated” 42 Cosan workers in conditions analogous to slavery, according to the list. Another 163 employers are also on the list.

Cosan is also slumping on speculation the government will reduce the amount of ethanol mixed with gasoline, Hood said in a phone interview. Brazil may cut the proportion of ethanol that is mixed into gasoline as early as Jan. 11, Agriculture Minister Reinhold Stephanes told reporters in Brasilia today.

The government may cut the ethanol requirement to as little as 20 percent from the current mix of 25 percent, Hood said in a phone interview.

Cosan’s stock more than doubled last year as sugar rose to the highest in almost three decades. The sweetener rose today in New York on renewed concern that a global supply deficit may widen.

Sao Martinho SA, Brazil’s third-biggest sugar and ethanol producer, lost 4.2 percent to 18.20 reais.