Analysts prep for Brazil earnings season

Analysts prep for Brazil earnings season

Corporate & Sovereign Strategy Capital Markets Economy & Policy Brazil

A truckers strike in May and a stronger US dollar are expected to highlight company figures in Brazil’s upcoming Q2 earnings season, analysts have told LatinFinance.

The Brazilian real appreciated 16% against the dollar during the second quarter after a spike in US Treasuries strengthened the Greenback.

Pedro Galdi, an investment analyst at Mirae Asset Wealth Management, said despite the volatility, most corporates will be judged on their leverage levels.

“Exporters and indebted companies will feel the impact [of a stronger US dollar] in different ways,” said Galdi.

Petrochemical company Braskem, for example, has significant amounts of dollar debt and may be hit hard by the 10-day truckers strike earlier in the year.

According to the company’s Q1 financial statement, Braskem’s Brazilian units posted EBITDA of BRL1.463bn ($378m), accounting for 57% of it consolidated EBITDA from all segments.

State-run energy company Petrobras and meatpacker BRF both face heavy debt loads, despite the former’s efforts to reduce leverage through asset sales and liability management exercises.

Galdi said these companies will have encountered negative foreign currency variations during the second quarter of this year.

Rafael Bevilacqua, chief strategist at Levante said industries such as logistics, steel and retail were also bound to be hit by the truckers strike.

“Cattle on the road probably died and there was a lack of grain to feed animals, this can even impact the third quarter,” said Bevilacqua.

Earnings reports from beverage firm Ambev, retailer Lojas Americanas and road concessionaires including CCR and EcoRodovias will be closely watched in the coming weeks.

Financial institutions, meanwhile, are likely to maintain their positive run of earnings reports. Sources have said that Bradesco and Itaú Unibanco have kept loan offers on ice, but raised service fees, pricing spreads and consequently, their income levels.

Miner Vale is thought to have leveraged the strong US dollar to its benefit, positively impacting exports. The company has also invested in iron ore extraction out of Carajás in the state of Pará.

Galdi also said Vale was set to gain a $30 premium over the international price of iron ore, which has averaged $65 per ton this year.

Here’s a snapshot of when some of Brazil’s biggest companies are announcing their Q2 results:
- Braskem, August 8
- Petrobras, August 10
- BRF, August 9
- Ambev, July 26
- Lojas Americanas, August 9
- CCR, August 14
- EcoRodovias, July 26
- Vale, July 25
- Bradesco, July 26 and
- Itaú Unibanco, July 30