Motorcycle fleet grows and boosts sales of add-ons, parts

Mercado de motos aquece em julho, mas segue com falta de modelos novos |  Automotive Business

Each one of the 1.3 million motorcycles sold since July last year have caused a business multiplier effect in several sectors of the economy amidst the pandemic. Regardless of power or price, they have boosted sales of related sectors, ranging from spare parts to clothes, and have raised the revenues of companies such as Nakata, Pirelli, and Taurus Helmets.

The manufacturers themselves see the importance of the growing sale of licensed products in the final results. After-sales services and the spare parts market have always been important, but they have gained more relevance in the midst of the pandemic with the significant growth of the motorcycle fleet, driven by factors ranging from delivery to tourism.

In 2010 there was one motorcycle on the streets for every 12 Brazilians. In 2020, the proportion was of seven people per vehicle. In some states, this rate drops to three residents per registered motorcycle.

And the expectation is to continue improving this indicator. Abraciclo, which represents the manufacturers installed in the Manaus Industrial Complex, expects to close 2021 with 1.2 million licensed vehicles, surpassing 2019, which recorded 1.08 million deliveries. Motorcycles represent about 27% of the fleet in circulation in the country, close to 29.1 million units.

“In our business there is a direct relationship between fleet growth and mileage with potential for spare parts. The more motorcycles and the more they run, the bigger is our market,” says Marcelo Tonon, Nakata’s head of products and supply chain.

The manufacturer of shock absorbers, suspension, transmission and brakes – parts that suffer accelerated wear in any vehicle – saw a 35% increase in the motorcycle segment over 2019. Compared to 2020, when there were problems due to the pandemic, the increase is between 60% and 70%. “The market that had been growing 10% a year, skyrocketed in 2020.”

The motorcycle segment is new to Nakata. It came up in 2017 and is heading for 10% of the company’s revenues. It operates only in the after-sales and says it had no problems to meet the demand after the opening of the new plant in the municipality of Extrema, in the south of Minas Gerais state, which more than doubled the production capacity of its entire portfolio.

The tire manufacturer Pirelli equips 95% of the motorcycles that leave the assembly lines in Manaus. Today, 25% of total production goes to motorcycles. Half of it is sold to automakers. The remainder goes to the spare parts market. “Motorcycles helped sustain the activities of the economy during the most critical period of the pandemic, but other factors help explain the increase in consumption in the segment. The motorcycle tourism and the growth driving schools also strengthen this effect”, says Rutemberg Fonseca, commercial and motorcycle marketing head for Pirelli Latin America.

The manufacturer identified two changes in behavior during this period. One is the growth in the production of tires for the premium line in the Southeast region, especially in São Paulo. The other is the expansion of tires for the Metzeler brand in the Northeast region. Metzeler equips the off-road models. “People who used to travel abroad have opted for trips within the country. And motorcycle tourism grew in the period.” According to Anip, an entity that brings together tire manufacturers, sales in the motorcycle segment will grow 10.2% in the year over 2020 and 3.5% compared to 2019.

Among the add-ons, the helmet is fundamental. With a helmet factory in Mandirituba, in the state of Paraná, Taurus Helmets is on track to grow 20% in volume this year over 2020. The company expects to close the year with a production of 131,000 units per month. The expansion in revenues, not disclosed, should be around 40%. “The individual urban mobility will probably continue to drive sales. I believe that in 2023 or 2024 we will have 1.5 million motorcycles sold per year”, says Carlos Laurentis, CEO of the company.

With 350 employees and working in two shifts, Mr. Laurentis says that he can expand the production with the current structure he has up to 70%. Helmets started to be sold through the internet as a strategy to get closer to the final customer. “I believe the market will continue to grow in 2022, but at a lower rate than the 20% this year.”

Manufactures felt that the expansion on the assembly lines has also reached the “small stores”. The sale of clothes and other licensed items has grown in recent months in all segments. Market leader with nearly 80% of motorcycle sales, Honda has the challenge of offering products from the basic, cheapest model to the premium ones.

Source: Valor international

Government plans to revaccinate every Brazilian in 2022

The Brazilian government intends to revaccinate the entire population against Covid-19 next year, but it still needs to decide where the money to buy the doses will come from.

In an interview with Valor, Ministry of Health’s executive secretary Rodrigo Cruz stated that Minister Marcelo Queiroga is likely to present in the next few days a plan for vaccination and for the sanitary management of the pandemic in 2022. The idea is to ensure there is a purchase option in case a revaccination is necessary – besides buying one dose per person.

“We talk to the laboratories. Europe and most of the countries that have already signed a contract for next year using this reinforcement strategy: a revaccination, with one dose per person. So, today, that’s how the ministry is working,” he said.

The lack of definition about the resources to guarantee revaccination has generated fear among state and municipal secretaries in the area. The main concern is the drastic reduction foreseen in the budget to fight the pandemic in 2022.

The budget bill sent to Congress in August has a provision of R$7 billion for this item. The volume is small compared to the R$42.2 billion disbursed in 2020 and the R$47.1 billion authorized this year.

“We are concerned because what was provisioned for fighting the pandemic in 2022 is R$7 billion. It wouldn’t be enough not even to buy vaccines,” the president of the National Council of Health Secretaries (Conass), Carlos Lula, told Valor.

Mr. Cruz, however, asserts there will be no lack of money. With the budget limited by the spending cap, the ministry counts on the resources to be released in case of the approval of the constitutional amendment proposal (PEC) to postpone court-ordered payments, which are expected to generate a slack of R$33 billion. That money would be used for the payment of these court-ordered debts. Without the PEC, the alternative will be to ask the Congress for additional credit.

In 2020, Brazil spent R$2.2 billion of the R$ 24.5 billion expected for the acquisition of vaccine and inputs, according to the Monitoring Panel of the Union Spending on Combating Covid-19 from the National Treasury. This year, R$13.2 billion have already been spent, compared to a total of R$ 26.2 billion foreseen.

“The main message that we need to send not only to the market, but to society, is that the federal government has made and will make every effort to guarantee vaccination for all Brazilians,” said the secretary.

In addition to revaccination, the federal government, States and municipalities will need to plan the care of people with Covid-19 complications and the large number of surgeries and elective procedures postponed because of the pandemic.

“We must schedule something for the post-war period. We will have to restructure the network for the post-pandemic period and some services that were paralyzed in the last two years. The need to debate the 2022 budget is also about this”, said Mr. Lula.

The ministry is expected to meet the request of states and municipalities and maintain at least 5,000 of the 25,000 new ICU beds open during the pandemic, according to Mr. Cruz. And it will still define which vaccines will be used next year.

The tendency is to use the AstraZeneca and Pfizer vaccines, which already have permanent registration with Brazilian Health Regulatory Agency (Anvisa), in addition to the Janssen vaccine, which is expected to obtain final authorization in the coming weeks.

Valor reported last week that the federal government does not intend to buy more doses of CoronaVac, developed by the Butantan Institute in partnership with Chinese Sinovac and which has authorization for emergency use in the country. The next day, Butantan’s head Dimas Covas said that negotiations for the purchase of new doses by the Ministry of Health never advanced. Mr. Cruz said he would not “announce something that is still not defined.”

“It is important to remember that the emergency registration was a regulated during the pandemic, because we did not have all the necessary elements for the approval of the vaccine in full, conditioning it to the delivery of more information so that we could have the definitive registration.”

Source: Valor international

Companies lengthen debt as appetite for fixed income rise

The rush for corporate debts, driven mainly by rising interest rates, is making room for a volume of long-term issues not yet seen in this market. There is a growing number of issues of 10-year securities, a term previously seen only in tax-exempt bonds. This has been improving companies’ debt profiles, but investors must be prepared to deal with the volatility of long-term bonds.

The average issue term weighted by the volume of each transaction rose to 5.2 years this year from 4.1 years in 2020, a survey by JGP found. In 2019, at the peak of the corporate debt market, the average was 4.7 years.

Companies not in infrastructure – a sector that allows issuance of tax-exempt bonds – are taking part in the move, said Alexandre Muller, a fund manager at JGP. It is also noteworthy that newcomers in this market, some lacking an AAA rating, are issuing long-term securities. This is the case of car rental company Movidas, which has a local currency rating of AA- by Fitch, and issued a 10-year bond this year. “This is great news as it shows the market is growing. This results in greater risk diversity and, consequently, funds with more diverse performance,” he said.

According to data from Anbima, the association of securities firms, of the total bond issuance in the primary market between January and August this year (latest data available), 22.7% had a term longer than 10 years. In the same period last year, this share was 15.8%, while in 2015 was 8.3%. Very short-term securities, maturing in up to three years, accounted for 24.9% of issuance in the period, compared to 41.9% in 2020.

Companies like Localiza (car rental), Cosan (sugar and ethanol), Itaúsa (investments), Klabin (pulp making) and Rede D’Or (healthcare) made recently or prepare 10-year issues. Asset managers say the environment remains favorable for debt lengthening.

Vivian Lee, a partner at Ibiúna Investimentos, says the lengthening of terms is largely the result of the lower spreads of shorter securities (rate above the CDI variation or, in the case of IPCA-indexed bonds, above the remuneration of NTN-Bs, government bonds linked to the price index). With a higher Selic rate, the flow to corporate debt assets has skyrocketed in recent months, bringing down the spreads of the bonds. To ensure better returns, the investor has shown an appetite, therefore, for longer securities and therefore more exposed to volatility. This risk ends up being offset, Ms. Lee said, by the fact that the secondary bond market has grown substantially in recent years, which allows investors to divest the position more easily in a situation of instability.

The turnover of the secondary market for bonds reached R$126.9 billion between January and September of this year, according to JGP. It reached R$122 billion in the same period last year and R$144 billion in the full year 2019. In 2018, the turnover was much lower, at R$50.9 billion.

On the issuers’ side, the adjustment and improvement of balance sheets over the pandemic makes room for this increase in longer-term debt, said Ricardo Carvalho, executive director at Fitch Ratings. “Companies have done their homework and are looking for growth opportunities,” he said. “With that, we saw issuance not only from AAA-rated companies, but also from AA and even from those in the A range.”

The very troubled landscape was also an argument for these companies to tap the market now to take advantage of the favorable window, in which rising interest rates draw a strong flow of investments to fixed income. “The [presidential] election generates volatility, besides inflation and the water crisis. The menu for 2022 is quite indigestible,” he said.

Long-term issuance removes from companies’ horizon, therefore, the risk of refinancing for the coming years, which carries a lot of uncertainty. The risk, Mr. Carvalho said, is that a worsening of market conditions will lead investors to turn to higher-quality, AAA assets, which could generate volatility in those with lower ratings. “Investors have to be aware that they are already receiving a higher return to stomach this risk,” he warned.

The scenario of uncertainty about growth has affected the Brazilian stock market, because this market is directly impacted by expectations, said Arthur Nehmi, fixed income managing partner at Sparta. But in the case of fixed income, the dynamics of flow determine the behavior of prices. The behavior of interest rates, therefore, is the key variable at the moment.

He said recent data show that a basic interest rate below 6% triggers withdrawal of bonds and flight from the stock exchange, and an interest rate between 6% and 9% makes corporate debt more attractive. But a Selic above 10% may lead investors to seek sovereign debt assets – which would make fixed-income funds more competitive than the corporate debt ones.

Source: Valor international


September 2021

Brazil ranks seven in digital transformation in public service – Wikipédia, a enciclopédia livre

Brazil ranked seven on the World Bank list assessing the current state of digital transformation in the public service across 198 economies. The result was released by the federal government today (Sep. 30).

According to the bank’s GovTech Maturity Index 2020, the country stood ahead of all other nations in the American continent, including the US and Canada.

Ahead of Brazil are South Korea, Estonia, France, Denmark, Austria, and the UK. Furthermore, Brazil is the only country among the ten first nations with a population of over 100 million people.

The result, the government stated, stems from improvements in the government’s Gov.Br platform, with over 115 users today. Early in 2019, the web portal was accessed by some 1.8 million people. The platform enables visitors to gain access to a number of digital services and information and the relationship between government and citizen.

The World Bank’s GovTech index surveyed countries considering four aspects: support for the main government systems; enhanced service delivery; integrated citizen engagement; and the encouragement of the development of digital skills in the public sector, along with the appropriate legal and regulatory regimen, training, and innovation.

Brazil stood out for digital solutions of massive impact, like the payment of unemployment benefits and the emergency aid aimed at mitigating the effects of the COVID-19 pandemic.

Translation: Fabrício Ferreira –  Edition: Kleber Sampaio / Nira Foster

Source: Agência Brasil

Meatpackers shares rise despite suspension of beef exports to China

As Coronavirus Fatalities Rise, Trump Sends Immigrant Meatpackers Back to  Work

China’s embargo on Brazilian beef went unnoticed by the market. The shares of JBS, Marfrig and Minerva, the main Brazilian meatpackers focused on the product, have risen since the suspension of exports, on September 4, partly due to the low availability of cattle in Brazil.

The first news about the two atypical cases of mad cow disease in Mato Grosso and Minas Gerais states began to circulate in the week of August 30 in farmers’ social media.

The Ministry of Agriculture kept silent for a few days until the results were confirmed, and during this period of uncertainty, Minerva felt the most. Between August 30th and September 3rd, Minerva shares fell 7.7%, to R$7.79.

JBS, global leader in animal proteins, with most of the revenue generated in the United States, saw its stocks retreat 0.3%, to R$31.10, while those of Marfrig, the second largest meat company, also strong in the American market, even rose: 1.76%, to R$20.04.

The ministry’s confirmation of the atypical cases on Saturday 4 was followed by the voluntary suspension of sales to China, as provided for in the bilateral sanitary protocol signed with the Asian country, which had been buying 60% of Brazilian beef shipments.

But the news did not affect the large meatpackers, although it has harmed the business of smaller companies in the segment. On Thursday, the shares of the three largest companies closed at higher levels than on September 3.

To calm investors, Minerva announced on September 6 logistical changes to overcome the situation. The meatpacker informed it would maintain supply to the Chinese market through three plants of its subsidiary Athena Foods, located in Uruguay and Argentina. With this, between September 3 and 30, the stocks are up 34.1%, to R$10.45.

In the same period, Marfrig rose 28%, to R$25.66. The meatpacker also saw investors raise their bets on the merger with BRF, in which Marcos Molina’s company bought a stake of almost 32%

And, if JBS almost did not feel the turmoil of the “mad cow” disease, its shares rose less than its competitors’ stocks— and even so the rise was 19.2%, to R$37.07.

Source: Valor international

Final level matters more than rate-hike pace, Central Bank says

Brazilian Senate passes bill increasing central bank independence - Central  Banking

Central Bank President Roberto Campos Neto said the level of interest rates at the end of the current monetary tightening cycle is more important to meet inflation targets than the pace of increase in each meeting of the Monetary Policy Committee (Copom).

This was a reaction to the demands of the financial market for the Central Bank to accelerate the pace of hikes, currently at 100 basis points point per meeting, to ensure monetary adjustment in time to bring inflation down to next year’s target.

In the interview given Thursday in order to detail the Quarterly Inflation Report (RTI), before answering journalists’ questions, Mr. Campos asked to make two “clarifications about some recent questions.” “The first is to say that the word ‘significantly’ used in the minutes [of the Monetary Policy Committee] refers to the final Selic level,” he said.

Since the release of the minutes on Tuesday, analysts from financial and consulting firms had been wondering whether the “significantly restrictive” level to which the Central Bank promised to take the Selic, Brazil’s benchmark interest rate, was related to the final level of the cycle or to other factors, such as the pace of increase.

When asked what exactly the full interest rate adjustment planned by Copom would be, Mr. Campos did not give further details. “We have no way of knowing the final Selic,” he said. “We are already conducting [monetary policy] with enough transparency through communication to give directions to the market. We talk about neutral [level], above neutral, restrictive territory and explain exactly why we are going in this direction and how we are seeing the other variables.”

The Central Bank stressed that the neutral real interest rate, which neither accelerates nor decelerates inflation, is at 3% per year. In his second clarification, Mr. Campos said that in order to affirm that monetary policy was already in restrictive territory – as it was done in the minutes – the Central Bank conducts an exercise. On the day of the Copom meeting, it compares the trajectories of the Selic rate and the Extended Consumer Price Index (IPCA), Brazil’s benchmark inflation index IPCA, for one year with the neutral rate.

The central banker also rejected the hypothesis of adopting an adjusted inflation target next year, a proposal made by some economists in the face of the challenge of lowering the IPCA from near two digits to the 2022 target of 3.5%. “We will continue to pursue the framework in exactly the way it has been done,” he said. “We believe it is important to achieve the target over the relevant horizon [the period considered by monetary policy].”

The scenario outlined by the monetary authority in the RTI also projects a slower recovery of the economic slack than in the previous report. In June, the estimate was that the closing of the output gap, a measure of economic slack, would materialize “along 2022.” Now, the Central Bank estimates that there will be slack (negative gap) of 1.2% in the last quarter of next year.

At the event, Mr. Campos also defended the lengthening of the cycle of Selic hikes. “(…) We have some factors that we previously thought were temporary and that we now think are more persistent,” he said.

“This persistence has contaminated other inflation indexes, even with the cores running well above the targets,” he said. “We understand that this adjustment is necessary to get that addressed.”

For his part, the Central Bank’s economic policy director, Fabio Kanczuk, said that with the current pace of hikes, the monetary authority will achieve “the convergence [of inflation to the target] in 2022.”

The Selic is at 6.25% per year. Right now, the Copom is targeting 2022 and, to a lesser extent, 2023, so to steer the Selic policy interest rate – this is the relevant horizon for monetary policy now. For each of these years the inflation target is 3.5% and 3.25%, respectively. In both cases, there is a 1.5 percentage points tolerance level either way.

In the RTI, the Central Bank calculated for 2022 at 17% and 11% the chances of inflation breaching the ceiling and the floor of the target, respectively. Until August, the 12-month IPCA is at 9.68%.

As for the inflationary inertia, Mr. Kanczuk said that the monetary authority works with a coefficient “equal to that of the past,” although some exercises done by the Central Bank show an inertia “a little bit lower.” Inertia measures how much past inflation affects future inflation. According to him, the important inertia data “are mainly the services.”

The president of the monetary authority also revealed that the Central Bank estimates that the specific demand for dollars caused by the changes in banks’ need for overhedging will be $17.4 billion by the end of the year, a volume classified by him as “quite large.” Mr. Campos defended the fact that the Central Bank has already announced auctions to deal with this demand. “This gives us a greater degree of freedom and mitigates volatility.”

Source: Valor international

Petrobras seeks private-sector partners for social action

Petrobras intends to involve other companies in a social program to dole out cooking gas (LPG) to poor families, sources say. The state-owned oil company announced on Wednesday a plan to set aside R$300 million in 15 months for this program, which will focus on LPG and benefit about 400,000 families.

Copa Energia, which brings together the Copagaz and Liquigás brands, confirmed it has had initial talks with Petrobras’s ESG team, which deals with environmental, social and governance matters. Ultragaz said it is waiting for more operational details of the project, while the Edson Queiroz group, which controls Nacional Gás, said programs like the one at Petrobras are of “extreme importance” to society.

Petrobras seeks to widen the effort and prevent the program from being used for political purposes as the election year approaches. It is also trying to secure more resources. A source said that they have even considered the possibility of match-funding to stimulate private companies: for each company’s contribution, Petrobras would give another share.

The announcement of the program came in the wake of complaints from President Jair Bolsonaro and Chamber of Deputies Speaker Arthur Lira about the prices of gasoline and LPG.

On Monday, the same day that Mr. Bolsonaro said in Brasília he would like gasoline prices to be at R$4 per liter – they cost, on average, R$6 in the pumps – Petrobras CEO Joaquim Silva e Luna called a press conference in Rio to say nothing would change in Petrobras’s pricing policy. On Tuesday, Petrobras raised diesel prices by 8.89% and on Wednesday night came the announcement for LPG.

Although Petrobras classified the measure as a “social” program, a number of people saw it as a result of recent political pressure for the company to reduce gasoline, diesel and LPG prices amid the global scenario of rising demand and oil and gas prices. “One wouldn’t carry out the program if not pressured,” a source said. Another source said that the initiative had been thought of since the beginning of 2021 and that it was the worsening of the social crisis that led Petrobras to announce it.

According to the source, Petrobras went as far as it could go in the program considering the company’s good financial situation, favored by oil prices, and the good prospects for the second half of the year. On the one hand, the R$300 million represent relatively little for a company the size of Petrobras. But the value of the program doubles what the company has been investing in the social field. In 2020, the state-owned company invested R$145.5 million in social projects, including environment, culture, sports, scientific, corporate and technological projects, and donations to fight the Covid-19.

The limit of what Petrobras can do in this field brings about the debate of the company’s social function. “The government is the one who has to worry about social policy. [It includes] taking, if it wants so, money received from Petrobras dividends and taxes to invest more in social policies,” a source said.

Petrobras will pay R$41.9 billion this year in dividends and interest on equity. The government, the company’s largest individual shareholder, will receive R$15.4 billion of this. The first installment, of R$10.3 billion, corresponding to the company’s results in 2020, was paid in April and the government got R$3.8 billion. The second one, of R$31.6 billion, accounts for the dividends on the result foreseen for this year, and the government will take R$11.6 billion. In August, the company paid R$21 billion of this total, and the remaining R$10.6 billion will be paid in December.

The payment of the dividends has sparked a political debate in recent days as some question the use of the funds for shareholder remuneration. Petrobras announced the LPG program in this scenario. In a statement, the company said the program model is in the final phase of studies, which includes defining the criteria to choose the families.

It also said it will seek partners to increase the amount to be invested, with the possibility of creating a fund so other companies join the project. Pedro Zahran Turqueto, Copa Energia’s head of strategy and market, said that despite having had initial talks about the matter with Petrobras, it is still unclear how this fund would work. He said the company supports the effort but must analyze from a financial standpoint how an eventual contribution would be.

Source: Valor international