Inflation, interest rates impact home appliances

The production of household appliances faces a deep decline in 2022 due to rising inflation and interest rates. The segment had already been struggling to receive inputs and saw costs soar amid a disrupted production chain and higher commodity prices brought by the pandemic. Now, consumers’ tight budgets – eroded by higher spending on food, electricity and fuel – are taking a toll on manufacturers.

The production of appliances plummeted 25.3% year over year, a survey by statistics agency IBGE shows, the third consecutive quarter of decline. A double-digit contraction is also clear in segments like white goods (refrigerator, stove, washing machine), brown goods (TV and stereo) and portable appliances. At the same time, the prices of appliances and equipment rose 7.46% in the same period, up 20.43% in the 12 months through March, according to data from IBGE and the Extended Consumer Price Index (IPCA), reflecting the higher production costs in the industry.

The war in Ukraine and the new outbreak of Covid-19 in China further aggravate a situation considered “challenging” by executives, who want to avoid a negative tone. The Asian country is shutting down plants due to lockdowns, especially in Shanghai, which impacts some companies.

Some companies are already seeking new suppliers of inputs – dual sourcing has expanded because of problems faced during the pandemic – and also air freight to shorten travel times for some products, while others are adopting a wait-and-see approach. Officially, all companies rule out the possibility of interrupting lines, but part of the market may face this risk.

Sergei Epof — Foto: Divulgação
Sergei Epof — Foto: Divulgação

“The drop in the first quarter is very much related to the consumer’s cash flow. Inflation has risen sharply and default rates too. The money available among Brazilian consumers for buying home appliances has been used for food, electricity and gasoline,” said Sergei Epof, Panasonic’s vice president of appliances in Brasil. His team focuses mainly on the white line, since the company halted the production of the brown line in the country last year, following a global strategy.

The Brazilian market is experiencing a combination of weaker demand, more expensive goods – as higher costs are passed on to prices – and more expensive credit, he said. Given the high interest rates, the consumer has been paying more for loans and default rates are on the rise.

“Demand has fallen and the price of appliances has risen. We had a lot of cost increase, which includes international freight, because of oil, the foreign exchange rate, which remains high despite the small recent drop, and inputs such as steel, resin and semiconductors,” Mr. Epof said. Part of the cost was passed on to consumers, he added.

As a result of inflation of inputs and falling purchasing power, “demand virtually disappeared,” said Marcelo Campos, managing director at Esmaltec. The company, which makes household appliances for Ceará-based Edson Queiroz group, has seen disappointing results since the middle of last year, especially in the last quarter of the year, typically a good time for durable goods sales due to Black Friday and the holidays. This happened after a surge in demand for appliances after the initial months of the pandemic, as people stayed at home.

The higher cost of components especially impact companies like Esmaltec, which works with the so-called entry-level products – those with lower prices, Mr. Campos said. Steel rose 163% in 2021, according to him, and is up 20% this year. This affects items such as compressors, evaporators and condensers for refrigerators. “Part of the cost has been passed on to consumers, but there is also a great effort to review negotiations with suppliers and processes to hold on some of the pressure,” he said.

The worsening of Covid-19 cases in China brought back the concern of shutdown factories at a time when the supply of inputs was already normalized, said Silvia Tamai, head of marketing for Latin America at Philips Walita, the company’s division of portable appliances.

“The situation of delays and lack of inputs had already been very much reduced. Our prospect in January was very positive as we had returned to a normal level. But the situation started to concern again around a month and a half ago.” Despite that, she still expects higher sales volumes in 2022 than last year.

The problems affect both the inputs used directly in the plant in Varginha, Minas Gerais, and the portion of products imported directly from other units, such as some models of coffee makers that come from Europe. Most of the inputs and products are produced in Brazil, she said, but even so the imported ones impact the production flow.

“There is a filter that goes into the espresso machine that comes from China. We bring the product from Europe, but they also depend on some component that comes from China,” she said.

Electrolux said in its global first-quarter financial report that falling sales in Latin America are linked to the decline in demand in Brazil, since inflation and high interest rates affected consumers’ purchasing power.

Whirpool, owner of Brastemp and Consul brands, did not mention the situation in Brazil in its first-quarter report, but predicted a decline in the household appliance industry as a whole in Latin America, Europe, Middle East and Africa this year.

Source: Valor International

https://valorinternational.globo.com

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Financial investment boosts revenues of states, capital cities

Juliana Damasceno — Foto: Leo Pinheiro/Valor
Juliana Damasceno — Foto: Leo Pinheiro/Valor

The combination of higher revenue flow, driven by surprising growth in tax collection, cash availability and rising interest rates raised the income from financial investments by states and municipalities in the most recent period. These revenues totaled R$17.7 billion considering states and state capitals in the 12 months through February. This is more than two times, in real terms, the amount seen in the previous period – R$7.8 billion. In relation to the 12-month period through February 2020, the pre-pandemic period, the real increase is 25%.

With the hike in Brazil’s benchmark interest rate Selic last Wednesday, to 12.75%, and still high cash availability, revenues are expected to increase even more this year given the expected lengthening of the monetary tightening cycle to tackle inflation.

In the case of capital cities, which totaled income revenue of R$3.9 billion in the 12 months through February, the amount is equivalent to 8.5% of service tax ISS revenue collected in the same period. The amount is less representative for states. There were R$13.8 billion, or little more than 2% of sales tax ICMS. This tax is the most important one for states, with the largest collection in the Brazilian tax system, equivalent to 7.6% of the GDP in 2021.

“We are going to see revenue from financial investments rise even more this year,” said Juliana Damasceno, an economist with Tendências and an associate researcher at Fundação Getulio Vargas. The increase in the 12 months through February this year reflects the strong monetary tightening cycle last year, when the Selic was escalating, she said. “In 2022, we already have a double-digit interest rate,” she said. This will lead to income revenue growth, even though we no longer have the same help from the revenue cycle, which advanced over the past year with some economic growth, but with “a very strong contribution from inflation.”

As for the capital cities, there was also a gradual pickup in services after the sharp decline in 2020 under the impact of the Covid-19 pandemic, she said. The scenario was conducive to improved revenue flow and greater cash availability.

The cycle of interest rate hikes and revenue growth have the “same root, which is the rise in inflation,” Ms. Damasceno said. “We shouldn’t celebrate fiscal adjustment because of inflation or because of the medicine used to fight it, which is high interest rates. We know the harmful effect that the lengthening of the monetary tightening cycle has on the economy,” she said, citing the effect on consumer spending and household indebtedness amid a very critical social situation.

The data on income from financial investments were collected by Valor based on state reports submitted to the National Treasury Secretariat. The revenues received were considered, adjusted by Brazil’s official inflation index IPCA in the 12-month periods to February 2020 and 2021.

Most municipalities are likely to benefit from the higher Selic on revenues from investments, said Giovanna Victer, Secretary of Finance of Salvador and chair of the national forum of municipal secretaries of Finance within the National Front of Mayors (FNP). Those in debt are the exception because the higher interest rates and inflation increases the debt service. In the capital city of Bahia, according to the fiscal reports, these revenues totaled R$130.2 million in the 12 months through February, almost three times, in real terms, the amount reported in the previous 12-month period (R$45.5 million) and up 7% from the 12-months period through February 2020.

Among capital cities, São Paulo stands out. Brazil’s most populous city totaled R$1.6 billion in revenue with income from financial investments in 12 months to February this year, compared with R$517.8 million in the previous 12 months. The city also saw an increase of 93.3% compared with the period from March 2019 to February 2020.

The great advantage of those revenues is that they are not earmarked, said George Santoro, who was Finance Secretary of Alagoas until May 4. The revenues are mostly free and are not subject to the constitutional allocations for health and education. One exception is revenue from the Fund for Maintenance and Development of Basic Education (Fundeb) and some other transfers. In these cases, the investments follow more limited rules and the earnings are earmarked for the same purpose as the funds that gave rise to them.

According to the fiscal reports from Alagoas, the revenue with income from investments in the state totaled R$251.7 million in the 12 months through February, compared with R$73.8 million in the previous 12 months. In relation to the same period to February 2020, the increase was 70.3%.

Felipe Salto, Secretary of Finance of the State of São Paulo, says that the funds are likely to help execute investments planned for this year. The higher revenue from financial investments results from the increase in tax collection thanks to the state’s economic growth, he said, which made possible a cash availability of R$34 billion. According to the state reports, these revenues totaled R$3.1 billion in the 12 months through February 2022, almost four times the amount seen in the previous period (R$802.41 million) and two times the amount collected through February 2020 (R$ 1.63 billion) in real terms.

“This income is important, but it is not a trend in the medium term,” he said, considering the broader factors that contributed to the higher collection in 2021. He recalled that last year the collection of ICMS rose 17% year over year, in real terms. The perspective for this year is of “much milder growth,” between 3% and 4% in real terms.

In addition to the cyclical nature that led to the growth in revenues of the subnational entities, Ms. Damasceno said states must know that inflation and interest benefit revenues at first, but then take a toll on expenses. “The scenario provokes pressures for adjustments not only of servants, as we have seen since the beginning of the year but also of suppliers.” The effect on spending, she said, can happen more in the medium and long term. “You can’t get there in debt and have spent all that revenue. There may be a delay, but this adjustment will happen,” she said.

Ms. Victer, from Salvador, agrees that although revenues still reflect a recovery in the service sector, the picture is not one of tranquility, and caution is necessary in order not to commit “seasonal and temporary” resources with permanent expenses.

The more recent scenario of better revenue flow has led the states to better invest funds, Mr. Santoro said. One challenge, however, is the limitations of the public power to tap financial instruments. He recalled that early last year, the state held a bidding process to get a better return on investments for about R$400 million in cash surpluses.

The call for bids imposed several restrictions on the participating institutions, such as net worth and other indicators, the former secretary said. The winner, he recalled, was a private-sector bank that offered yields above 110% of the interbank deposit rate (CDI). The State Prosecutor General’s Office, however, understood that the government was prevented from contracting with private-sector institutions. State-owned banks, he said, offered at the time 95% of the CDI. The issue was taken to the Economy Ministry, in search of more flexible rules, but there was no success, which led the state to contract other financial investments with state-run banks.

After announcing the possibility of paying the property tax IPTU with cryptocurrencies as of 2023, the City of Rio de Janeiro is now studying investments in this new asset.

In a note, the Rio de Janeiro Finance Secretariat told Valor that the city mulls “a cryptocurrency investment policy and a governance model for decision-making.” According to the note, a Municipal Committee of Investments in Cryptocurrencies will be created to refine the methodology. The municipality also said that in March it reached a cash balance of R$9 billion, the result of a cost-cutting effort, expense containment and structuring measures, such as the new fiscal regime and a tax overhaul.

Source: Valor International

https://valorinternational.globo.com

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Petrobras to increase diesel prices

The hike in diesel prices by Petrobras in refineries is imminent, Valor has learned. The product had, on Friday, a difference of about 20% in relation to prices on the global market. A partial recomposition of prices, in relation to the international parity, is important, at this moment, not only for Petrobras but also for other market players, such as private refineries and importers. The measure, if confirmed, will relieve the pressure on the state-owned company, and may facilitate the purchase of the product abroad by smaller companies, reducing the risk of shortages, a hypothesis that has been denied both by the company and the government.

The situation is complex, which has required discussions at Petrobras’s top management. On Friday, at the end of the day, the board of directors of the oil giant met to analyze a possible position facing the continued attacks of President Jair Bolsonaro on the company, as anticipated on Friday, Valor PRO, the real-time news service of Valor.

A response would be necessary in the face of president Bolsonaro’s virulence. On Thursday, moments before the release of Petrobras’s first quarter results, he compared the company’s profit to a “rape”. On Saturday, in Santa Rosa (state of Rio Grande do Sul), Mr. Bolsonaro criticized Petrobras again, saying that “no one can stand” the fuel increases. Informed about everything that happens in Petrobras, he speaks to his supporters knowing the limitations to intervene in the state-owned company.

Valor has found that there was no consensus in the board to produce a statement. The answer should come, therefore, in the form of a diesel hike by the company in a percentage that would cover most of the current gap. Petrobras did not immediately reply to a request for comment.

The market scenario for diesel is worrisome. On the external front, the price continues to rise as a result of the post-pandemic recovery and supply cuts resulting from the war in Ukraine. Russia accounts for about 25% of global diesel exports. The past few weeks have seen record diesel price increases in the United States.

The refining margins on diesel are twice as high as on gasoline. The increase in the price of the product in the Northern Hemisphere has effects for imports in Brazil. The diesel that will arrive in the country in July is being purchased now. But the extent to which Petrobras holds back the rise inhibits imports, since the price of the imported product arrives in Brazil at a higher price than that sold at the Petrobras refineries.

In the domestic market, the demand for diesel is still on the rise and there are concerns that the growth in consumption, driven by agribusiness, may lead to shortages in the second half of the year in some regions. The government and Petrobras have denied there is a risk of shortage of the product, which is fundamental to the farming and livestock sector and is essential in cargo transportation.

In an interview to Valor, Décio Oddone, former director of the National Petroleum Agency (ANP), also said he doesn’t believe in a shortage as long as the country follows the external price “fluctuations”.

On Friday, commenting on Petrobras’s results in the first quarter, Chief Trading & Logistics Officer Claudio Mastella ruled out the risk of shortage in the country. He said that the market is supplied by the national refining park and imports. Petrobras monitors the international markets and evaluates fuel prices daily, said Mr. Mastella.

Jose Mauro Coelho — Foto: Bruno Spada/MME
Jose Mauro Coelho — Foto: Bruno Spada/MME

Still on Friday, the CEO of Petrobras, José Mauro Coelho, said that the state-owned company is one of the companies that most collects taxes and government participation for the different spheres of government, with more than R$70 billion collected between January and March. Mr. Coelho said that the company is not insensitive to society, and cited the company’s program to help low-income families to have access to liquefied petroleum gas (LPG).

(Nelson Niero, in São Paulo, contributed to this story)

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Brazil proposes emergency corridors for food, input flows at WTO

The idea Brazil is discussing is that emergency corridors should be established to ensure flow of food and raw materials — Foto: FecoAgro/RS
The idea Brazil is discussing is that emergency corridors should be established to ensure flow of food and raw materials — Foto: FecoAgro/RS

Brazil has launched the idea of a major worldwide commitment for countries to let agricultural products flow in global markets, despite international sanctions against Russia and problems caused by lockdown measures in China, in discussions at the World Trade Organization (WTO).

The situation has become much more complicated, blocking the free flow of food, and could result in a new crisis. Many companies fear their ships will suffer from explosions in the Black Sea, insurance is more expensive, the lack of containers has increased with the situation in China as well and inflation is still rising in different parts of the world.

The idea Brazil is discussing with several other countries is that, just as humanitarian corridors exist, emergency corridors should be established to ensure the continuous flow of food and essential raw materials and inputs for cross-border food and agriculture production, including fertilizers.

With these corridors, it would then be possible to move certain commodities from Ukraine and Russia, for example. And countries like Brazil, which need fertilizers, will have the input to produce surpluses and help feed the world, as one source notes.

Ukraine and Russia account for less than 3% of world merchandise trade, but are important in certain sectors, such as food. About 30% of the world’s wheat and 73% of sunflower oil comes from the two countries, along with a lot of barley, corn and other grains.

Several regions of the world are heavily dependent on the Black Sea region. In Africa, 35 countries import food from Russia and Ukraine. The United Nations Conference on Trade and Development (UNCTAD) has warned that the new price spike is collateral damage from the war in Ukraine, which could undermine political stability and food security anywhere in the world.

The idea of emergency food corridors was mentioned today by Alexandre Parola, the Brazilian ambassador and permanent representative to the WTO, during the General Council of the organization.

For the Brazilian representative, food security will be the most important issue during the conference of trade ministers of the 164 member countries, scheduled for June in Geneva.

In Brazil’s view, this will be an opportunity to address the issue of agricultural reform in the near future, recognizing that the availability of and access to food necessarily requires international trade of agricultural products. The discussion also involves poorer countries, particularly affected by the rising bill for food imports.

For Brazil, in the face of the current emergency, it will also be necessary for countries in the WTO to reach an agreement to avoid the banning or restriction of food exports normally purchased for humanitarian reasons. One problem is the resistance of India, which is more focused on ensuring more flexibility on how to release its food stocks to the international market.

After the June ministerial conference, Brazil advocates that the WTO Committee on Agriculture discuss texts to structurally strengthen food security and sustainable development. In Brasília’s view, the effects of the recent crises and the current context have made it more urgent to negotiate disciplines that can help improve food security, in accordance with the obligation of Article 20 of the WTO Agriculture Agreement to agree on “substantial progressive reductions in support and protection.”

Source: Valor International

https://valorinternational.globo.com

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Petrobras exceeds expectations with profit of R$44bn

CEO José Mauro Coelho said results between January and March reflect a “healthy company” — Foto: Leo Pinheiro/Valor
CEO José Mauro Coelho said results between January and March reflect a “healthy company” — Foto: Leo Pinheiro/Valor

Oil prices, higher export volumes, lower costs in liquefied natural gas (LNG) imports and higher margins in diesel oil sales made Petrobras’s profit grow 38 times – or 3,718% – in the first quarter, to R$44.56 billion, compared with R$1.17 billion in the same period of 2021.

In a message delivered with the results, CEO José Mauro Coelho said the results between January and March reflect a “healthy company.” He also recalled that the company paid taxes to the federal government, states and municipalities equivalent to one and a half times the value of its net profit.

The company also highlighted, in a statement about the quarter’s results, that it disbursed almost R$70 billion in taxes, royalties and other payments to the federal government, states and municipalities in the first three months of the year.

The board of Petrobras approved, in a meeting held Thursday, the distribution of dividends in the amount of R$3.7155 per preferred and common share in circulation. According to the company, the total value is around R$48.5 billion.

Of the total, R$3.1387 are interim dividends referring to the remuneration paid in advance to the shareholders relative to the fiscal year 2022.

In addition, R$0.5767 per share will be paid as retained earnings included in the 2021 earnings report.

The dividends will be paid in two installments of R$1.8577, on June 20 and July 20. Shareholders who were listed on May 23 at B3 will be entitled to the dividend.

In the case of holders of depositary receipts (ADRs) on the New York Stock Exchange, the installments will be paid on June 27 and July 27. As of May 24, the shares in both markets will be negotiated without the right to the dividend.

Petrobras says that the dividend is in line with its remuneration policy, which establishes that the company can distribute 60% of the difference between operating cash flow and investments if gross debt is less than $65 billion.

Source: Valor International

https://valorinternational.globo.com

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Taxpayers negotiate debts worth R$263bn

The number of agreements reached by companies and individuals with the federal government for payment of tax debts reached 1.1 million in April — totaling R$263 billion in negotiated amounts. Taxpayers have been taking advantage of the so-called “tax transaction,” which allows the Attorney General’s Office of the National Treasury (PGFN) to grant discounts and installment plans.

This modality has existed for a little over two years. It was instituted in February 2020, through Law 13,988. Since then, the tax authorities are allowed to meet and negotiate — including very high debts.

The Candido Mendes University, for example, closed a deal a few days ago to settle a R$1.25 billion liability. It was the highest amount negotiated by the PGFN in the region that covers the states of Rio de Janeiro and Espírito Santo.

In São Paulo, multi-billion cases have been filed since last year. The Grupo Ruas, which operates in urban transportation, closed an agreement to pay R$3.12 billion in July. Inepar, which operates in the infrastructure industry, formalized the renegotiation of R$2.6 billion in tax debts in December.

It works differently from what was seen in the installment programs for tax debts Refis, which provided a single model for discounts and installment plans. In other words, a single calculation for all taxpayers in the country who wanted to join the program.

In the tax transactions, the agreements are customized for a specific group of taxpayers or individually. The discount and the value of the down payment and installments, in these cases, vary according to cash flow and payment capacity.

“The transaction considers the taxpayer’s actual economic situation. It is the only public policy capable of allowing regularization while respecting the principles of equality, justice, and free competition,” says attorney João Grognet, general coordinator of PGFN’s credit recovery strategies.

There are more than 10 modalities. In one, named individual transaction, the tax authorities and the taxpayer sit down to negotiate. It is designed for those who have debts of more than R$15 million. This was the model used by Candido Mendes, Grupo Ruas and Inepar.

The discounts, as a general rule, are up to 50% and the debt can be paid in installments over a maximum period of 84 months. Companies under judicial reorganization – the case of Inepar and Candido Mendes – have more advantages. Discounts can reach 70% and the payment term goes up to 120 months.

Individuals, micro and small companies, non-profit institutions, and educational institutions are even more favored. They fit into the highest percentage, 70%, and can pay their debts in up to 145 months.

The Candido Mendes University, besides being under protection from creditors, meets the requirements to take advantage of the best payment conditions. The original debt, of R$ 1.25 billion, was reduced to about R$400 million. The debt will be paid in 145 months.

The other modalities of transaction available to taxpayers have conditions established beforehand in a public notice or ordinance. In this case, the taxpayer decides to join. This week, for example, the PGFN opened discussions on goodwill amortization in the administrative or judicial sphere.

This litigation, according to the Secretariat of Federal Revenue, involves around R$150 billion. Whoever opts for the agreement must give up the lawsuit. There are discounts of up to 50% and the joining period ends on July 29.

Before that, on June 30th, there are other transactions that are expected to close. Among them, two pioneering ones were instituted during the pandemic. The one called extraordinary allows the payment of the debt with a down payment in three installments and the remainder in 81 installments, for companies — or 142 in case of individuals.

The other, called exceptional, allows the debt to be paid in 84 installments, or 145 for individuals, with a reduced down payment spread over 12 months and discounts of up to 70% on fines and interests.

The individual transaction — aimed at taxpayers who have large debts — has no deadline for agreements to be proposed. And they work in a more customized way.

Tiago Voss dos Reis — Foto: Divulgação
Tiago Voss dos Reis — Foto: Divulgação

“We are able to adjust them according to the economic condition of each debtor,” said Tiago Voss dos Reis, chief prosecutor of the region that covers Rio de Janeiro and Espírito Santo. He and attorney Andréa Borges Araújo were in charge of the negotiations with Candido Mendes.

The university will pay smaller monthly installments in the first two years, for example. It was agreed this way to reconcile the payments to the federal government with the commitments made in the judicial reorganization.

In the third year of the agreement, with a less uncomfortable cash flow, the value of the installments will increase — in a customized format: there will be 11 ordinary installments, representing 0.5% of the debt, and an extraordinary one, corresponding to 7%. This high value installment is called the “balloon installment” – it serves to strengthen the payment.

These high-value installments are related to the sale of the university’s real estate. Candido Mendes has an ongoing divestment plan, and the sales are expected to take place before the agreed maturity dates. If it doesn’t, however, it will have to pay the amount anyway.

The university has offered other properties and assets as a guarantee for payment. And, in addition, two managers are listed as guarantors of the debt. If Candido Mendes does not comply with the agreement, they will have to respond with their personal assets.

There were tax and social security debts accumulated since the 1980s. “It had been monitored for a long time by the attorney general’s office. With the settlement, besides the prospect of payment, we reduced litigation,” attorney Andréa Borges Araújo said.

Celso Viana, legal prorector at Cândido Mendes, sees the transaction as a great achievement. The university is in the process of corporate restructuring, to become a company — today it responds as a non-profit company — and the tax agreements, he says, solidifies this process. “It brings total security for potential investor partners,” he says.

Candido Mendes’ recovery process is led by retired judge Luiz Roberto Ayoub, one of the leading lawyers in bankruptcy. He is currently a partner at the law firm Galdino & Coelho.

For him, the negotiation of tax liabilities consolidates the viability of the recovery process and “proves the full capacity of the institution to pay all its debts.” The negotiations with PGFN were headed by tax attorney Gustavo Brigagão.

Only debts related to the Workers’ Severance Fund (FGTS) were left out of the agreement. This issue is being discussed in court. Candido Mendes closed a payment agreement with the workers in the judicial reorganization process. The PGFN, however, filed an appeal because the agreed discounts were above the limit allowed by the resolution of the Board of Trustees of the FGTS. Today, the decision of the court-ordered reorganization judge in favor of Candido Mendes is valid.

Source: Valor International

https://valorinternational.globo.com

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Petrobras invites Eneva, PetroRecôncavo for Bahia-Terra cluster

Negotiation phase will now begin on the terms and conditions for the potential acquisition of Petrobras’s stakes — Foto: Leo Pinheiro/Valor
Negotiation phase will now begin on the terms and conditions for the potential acquisition of Petrobras’s stakes — Foto: Leo Pinheiro/Valor

Oil operator PetroRecôncavo and power generation company Eneva announced Wednesday they have been invited by Petrobras to continue negotiations for the acquisition of the state-run company’s stake in the Bahia-Terra cluster. The consortium formed by the two companies now enters the negotiations as “selected binding offeror.”

In March, the duo had submitted a binding offer for the set of assets.

The negotiation phase will now begin on the terms and conditions for the potential acquisition of Petrobras’s stakes in a set of concessions for onshore E&P fields and associated facilities in the Recôncavo and Tucano basins, in Bahia, the consortium said in a note.

In Wednesday’s note, the companies made it clear, without revealing values, that they have submitted a joint offer — with 40% participation by Eneva and 60% by PetroRecôncavo, the latter being the operator of the assets.

The statement confirms previous report by Brazil Journal citing sources close to the negotiations. The consortium offered $1.35 billion for the asset, according to the news outlet.

The conclusion of the deal, as well as its terms and conditions and the amount involved are still subject to the acceptance of the offer by Petrobras, the negotiation and execution of the contract, the competent legal and regulatory approvals, as well as the fulfillment of certain conditions precedent, in particular the approval of the antitrust watchdog Cade and the National Petroleum Agency (ANP).

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Analysis: Nubank faces first governance test

Nubank is currently facing its toughest governance test since it went public — Foto: Divulgação
Nubank is currently facing its toughest governance test since it went public — Foto: Divulgação

Nubank is currently facing its toughest governance test since it went public, with pomp, in December. In addition to the controversy of more than R$800 million in compensation for the management team, the lock-up period on the trading of shares sold in the IPO was set to end earlier than expected. The result is reflected in the fintech’s market capitalization, which was $24.6 billion on Wednesday, 40.7% lower than when it went public.

Earlier this week, the digital bank changed the date for the end of the lock-up period. The deadline was shortened by about a month, to May 17, the day after the release of first-quarter results.

As Nubank signaled that it did not intend to slow down in credit despite rising interest rates, the measure led some investors to wonder if this was not a sign of bad results to come. The suspicion was greater because it was compounded by the uneasiness with the compensation package planned for the management team this year, a whopping R$804 million. The number, which appears in official Nubank documents, caused a furor in social networks last week after it was reported by Valor.

Days later, Nubank released a statement to the market to explain itself to investors: 84% of this remuneration goes to David Vélez, cofounder and CEO of the fintech, who will only receive it if ambitious goals are met, and that the banker is committed to donating his fortune in life.

It wasn’t enough to calm things down. First, the total amount continues to differ from what other banks and companies pay. Second, the clarification took a long time – the statement to the Securities and Exchange Commission (SEC) was made five days after the news went viral, an eternity in times of social networks.

Stocks are a snapshot and do not always say much about the quality of a company, but they are the most important signal of the perception that investors have of it. Therefore, Nubank will have to learn how to deal with them. In this sense, transparency always goes down well – even more so at a time when the cost of money is rising and shortening the tolerance of technology investors.

Source: Valor International

https://valorinternational.globo.com

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Klabin sees seasonal recovery in domestic market in 2Q

Klabin (KLBN11): XP reitera recomendação de compra após resultados

The second quarter is still expected to be marked by sluggish activity on the domestic market, although a “slight” upturn in demand for paper packaging has already been perceived, due to more favorable seasonality, says Klabin CEO Cristiano Teixeira. International trade, on the other hand, is likely to remain firm.

“The domestic market is still likely to go slowly because of the inflation scenario,” he said in a conference call with analysts. In the first quarter, the company’s sales to the Brazilian market represented 55% of the 900,000 tonnes sold in total, against 56% in the fourth quarter and 61% in the same period of 2021.

At the beginning of the year, Klabin benefited mainly from price increases realized in recent quarters and from the reallocation of volumes to the overseas market, which offset the greater pressure of costs and the seasonally weaker consumption of cardboard boxes in the country. As a result, net revenue rose 28%, to R$4.42 billion, and the EBITDA advanced 35%, to R$1.73 billion.

According to the company’s head of the pulp business unit, Alexandre Nicolini, the readjustments announced for hardwood pulp as of May 1, in China, the United States and Europe, have already been applied. In the Chinese market, the increase announced by the company was $30, to $810 per tonne.

Traditionally, Suzano, the world’s largest producer of eucalyptus pulp, used to lead the movement of readjustments by South American producers in the different regions. In recent months, however, Klabin has taken the lead. “The company had a vision of the difference between the resale price and the market price in China and, therefore, there was room for a new increase,” Mr. Nicolini justified.

In Europe, mentioned Mr. Nicolini, an increase of $50 per tonne was applied for May and there is a new increase, of $50 per tonne, announced for June. “The market remains quite resilient, although the situation in China is a little more delicate, because of the lockdowns. Even so, Klabin does not feel any reduction in the demand for its products,” he said.

According to the executive, the company anticipated a higher pressure on pulp prices in China compared to other regions and, last year, decided to increase the volumes for the other markets, including Brazil. The strategy proved to be right, and the realized prices were above the industry average.

In the corrugated cardboard business, said head of packaging Douglas Dalmasi, Klabin opted to forgo volume and concentrate on prices during the first quarter. “We don’t look at specific market share. Our vision is more medium-term. We underperformed the market in terms of volume, but prices were above the sector’s average because we favor profitability,” he said.

In the kraftliner market, Flavio Deganutti, head of the paper business, declared it is possible to see the first signs of a resumption in U.S. exports of this type of paper, but a major announcement of capacity closures contributes to maintaining the fairer relationship between global supply and demand. “We don’t see any major movement [of change in this scenario] in the coming months,” he added.

Source: Valor International

https://valorinternational.globo.com

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Diesel price hike increases supply risk

The rise in diesel prices and the weakening of the real against the dollar in the last few weeks have accentuated concerns about the gap between fuel prices defined by Petrobras and the international parity. The state-run company has not adjusted the prices of diesel and gasoline in Brazil for 55 days, which has hindered imports by other agents. The scenario leads to discussions about the risks of shortages in the fuel market. The main concern of the market is diesel. Sources in the sector, however, rule out the risk of a systemic and generalized shortage, although supply may face problems in some regions.

As the prices gap widened, imports by regional distributors and smaller importers fell. Thus, the biggest distributors and Petrobras itself have been responsible for supplying the market, which are still importing. Some regions have faced greater difficulty in meeting the total demand by smaller distributors. According to sources, the issues are registered in Vitória (Espírito Santo), which is supplied by short-sea shipping, some cities in Goiás and Minas Gerais and places in the Northeast regions.

“What happens is that on a given day a gas station or a consumer can run out of product, or no longer be served by the distributor that normally serves them and start being supplied by some other,” said Sérgio Araújo, head of the Brazilian Association of Fuel Importers (Abicom).

Sources linked to major distributors say that occasional supply problems have occurred mainly at service stations that do not have supply loyalty agreements. The large distributors have managed to maintain imports and make an average, in the final prices, between the costs of fuel purchases at Petrobras’s refineries and purchases abroad. “Although with less surplus, the volumes always meet the demand,” said an executive who asked not to be named.

A reduction in the demand for diesel in the domestic market in recent weeks, due to seasonal factors, has also helped to stave off supply problems, sources said. Valeria Lima, head of downstream at the Brazilian Petroleum Institute (IBP), said that there is no risk of shortage, but the market is “very small.” Carla Ferreira, an analyst with the Institute in Strategic Studies of Petroleum, Natural Gas and Biofuels (Ineep), says that specific problems may require a reorganization of players.

There are also reports that some customers of the Mataripe refinery (Bahia) are no longer buying products from the refinery, in search of better prices in units operated by Petrobras in other states of the Northest region, such as the Abreu e Lima Refinery (Rnest), in Pernambuco. The Mataripe refinery was privatized at the end of last year and is currently operated by Mubadala’s Acelen.

The distance of almost 800 kilometers between Acelen’s refineries and Petrobras’s units has been covered by trucks from clients seeking the lower prices charged by the state-owned company, especially in this first week of May, sources say. “If the gap in prices is maintained, there is no doubt that this inversion of logistic flows will be accentuated,” says a source, who points out, however, that there are limits to this type of operation, since Rnest itself is not capable of meeting all consumption in the Northeast region.

The production of the national refineries cannot supply the entire demand in Brazil. According to data from the National Petroleum Agency (ANP), in March, Brazil imported 23.7% of the diesel consumed in the country. Of the imported volume, 46% was brought into the country by Petrobras itself and 54% by other companies. In the same month, considering the supply by local refineries, Petrobras was responsible for delivering 82% of the diesel consumed in the country to the distributors, and the Mataripe Refinery, for 9.7%, with the remainder coming from smaller companies.

According to Marcus D’Elia, the managing partner of the consulting firm Leggio, Petrobras has sought to increase the utilization of its own refineries, which has exceeded 90% in recent months. “This puts a little more product on the market, but does not solve the difference between demand and supply, which is structural. Today, effectively maintaining the country’s supply depends on imports, which are discouraged with a gap between fuel prices. Imports continue to occur, but, in a structural way, in the medium and long term this will always embed a risk,” he said.

The most acute situation occurs with diesel, a fuel sold by Petrobras to distributors with a difference of 26% in relation to international prices, according to calculations by consultancy StoneX. Abicom, on the other hand, calculates that the diesel price has an average difference of 24% in relation to international prices. Specialists explain that the international market is going through an unusual moment, in which the price of diesel has skyrocketed in relation to oil prices. “We are living an atypical moment, due to the variation in world demand, logistic issues and the variation in the level of stocks,” said Mr. Araújo, with Abicom.

In the case of gasoline, Ativa Investimentos points out that the gap between prices went to 19.1% on Wednesday from 14.9% on Friday. StoneX estimates that the gasoline sold by Petrobras is 6%, on average, below international prices, and Abicom calculates that prices are 12% below international prices, requiring an increase of R$0.54 a liter, on average.

Petrobras’s last adjustment was made on March 11, when the company raised diesel prices by 24.9%, and gasoline prices by 18.7%, in addition to a 16% increase in liquefied petroleum gas (LPG).

José Mauro Ferreira Coelho — Foto: Leo Pinheiro/Valor
José Mauro Ferreira Coelho — Foto: Leo Pinheiro/Valor

Since then, President Jair Bolsonaro’s dissatisfaction with price increases led to a change of command in the state-owned company, with the replacement of CEO Joaquim Silva e Luna by José Mauro Coelho on April 14.

Sources linked to Petrobras say that the company is unlikely to pass on the current price gap immediately to consumers. “Petrobras follows the policy of parity regarding the average prices over the last 12 months, it is normal to have periods in which the gap is wider. This month, due to the volatility of the exchange rate, there was an escalation,” said Ilan Arbetman, an analyst at Ativa Investimentos.

The government has been monitoring the situation. In a virtual event on Tuesday, the deputy executive secretary of the Ministry of Mines and Energy (MME), Pietro Mendes, said that, in the case of diesel, a monitoring desk was created to collect information from distributors. He ruled out supply problems in May.

“The government needs a plan for this kind of situation. It is not just a question of price policy, but of guaranteeing supply,” said Edmar Almeida, a professor at the Energy Institute at the Pontifical Catholic University in Rio (PUC-Rio).

In a note, Petrobras said that the sales prices seek a balance with the international market, following the upward and downward variations, but avoiding immediately passing on to prices the external volatility and changes in the exchange rate caused by broader factors. “Pricing decisions are based on technical and independent analyses based on the external and internal scenarios of the oil and oil products market, and there is no interference from the calendar of disclosure of results.”

Source: Valor International

https://valorinternational.globo.com

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