Retailers suffered both from inflation and interest on debts
Companies in this sample reported a combined sales revenue of R$1.6 trillion in the January-September period and boast a market capitalization of nearly R$2 trillion — Foto: Divulgação/B3
On the last day of the third-quarter earnings season, it is already possible to glimpse the state of public non-financial companies.
Taking the benchmark stock index Ibovespa as a base and excluding banks, insurance companies, and holding companies – and also heavyweights Petrobras and Vale, so as not to distort the numbers –, there are about 70 companies that can tell the story of the quarter. It would not be necessary to do so, but it should be noted that this is a tiny sample of the Brazilian business world and about 20% of the total number of publicly traded companies.
They are the most traded stocks and, for this reason, are part of Ibovespa. They reported a combined sales revenue of R$1.6 trillion in the January-September period and boast a market capitalization of nearly R$2 trillion, considering Monday’s prices.
Once again, costs weighed considerably on the result. The situation has improved in relation to cost inflation, and the rise in raw material prices, especially after the start of the war in Ukraine. There has been a cooldown, but the levels are still high compared to last year.
The numbers tell this story. This group of companies increased their sales revenues by 10% in the quarter and 15% in the nine months (for reference, official inflation is 6.47% in the 12 months through October). Costs, however, are up 17% in the quarter and 20% in the nine months. Excluding administrative expenses, sales, marketing, fees, and so on, the calculator is unforgiving. The operating profit was down 30% in the quarter – and 15% lower through September. It is a still profitable sample, but with a downward trend. Of the companies selected, 15 reported a loss (about 20%), compared to 11 in the third quarter last year (15%).
Going down the earnings reports, one comes to the dreaded financial line items, usually scary in times of exchange rate instability. This is not the case now. One difference with previous quarters was that this time companies complained a lot more about interest rates, whose effects hit their cash flows.
Retail suffered both from inflation on the sales line and interest on debts, the remedy against inflation that increased financial expenses. In the report that accompanies the financial statements, Americanas summarized the operating situation: “Between July and September, a combination of factors in the macroeconomic scenario challenged retailing as a whole in the country. The industry raised prices sharply, reflecting inflationary pressure and high interest rates, and Brazilian households, in debt and with reduced purchasing power, stopped buying more expensive items.”
Besides scaring consumers, the high interest rates have taken a toll on the companies’ finances. Cash-and-carry chain Assaí reported a net financial expense of R$440 million, up 168%, which accounted for 3.2% of sales. According to the company, this result continues “being impacted by the high interest rate, with an increase of about three times the [interbank deposit rate] CDI in the period, and the higher volume of gross debt given the backdrop of high investments in expansion, in particular, the project of hypermarket conversions.”
It was not only retail, of course. Positivo Tecnologia faced problems with cost and interest rates as well. The manufacturer of computers and electronic voting machines increased sales by almost 30%, but costs advanced further and ate into the gross margin. Financial expenses took another chunk of the profit because of interest on higher debt, according to the company. In the Simpar group, which owns logistics and car-rental companies, the financial result was negative by R$1.25 billion, four times higher. The figure surprised the market and the effect was immediate: the shares closed down 8%.
By Nelson Niero — São Paulo
Source: Valor International