Brazil enters carmakers’ race against climate change

Climate Change | OSCE

The greenhouse gases emitted by the automotive industry are mostly caused by the very vehicles that the industry has sold over the past decades. Estimates range from 75% to 96%. But making a car also pollutes. The decarbonization of the production of cars and auto parts involves Brazil, as the factories installed in the country must report to their headquarters, which have global targets to meet. Neutralizing the carbon emitted by the entire chain that involves a vehicle – which includes 2,500 to 5,000 parts – is a complex task. Even with a giant challenge ahead, the industry is already starting to move forward.

As a way to show society that they care about the climate emergency, the largest companies in the sector have started to work with deadlines that move up by at least ten years the goal of the Paris Agreement, which establishes the neutrality of carbon emissions by 2050.

Decarbonization comes at a price. Jaime Ardila, founder of U.S.-based Hawksbill and a consultant in this field, recalled that investments unveiled to this end around the world total $200 billion, according to international studies, a figure that excludes the electrification of vehicles. “But, in the end, the investments will have to be larger,” he said.

In Brazil, there are no calculations of how much the automotive industry has invested in the decarbonization of its industrial processes and logistics. “It depends on the paths that each one will follow,” said Masao Ukon, a partner at Boston Consulting Group. If an auto parts company exchanges the entire fleet that transports its products for electric trucks, for example, it will spend more.

The sector’s great dilemma is how to find ways to involve the whole chain, as hundreds of suppliers deliver thousands of components daily. This is a system without stocks, a condition familiar to the industry for decades. If, on the one hand, just-in-time production has become a reference of lean manufacturing, on the other hand, the method consists of a daily shuttle of trucks to transport the parts.

For the carbon neutralization in this sector to be complete, it must also include car haulers, which take vehicles to dealerships and ports across the country. Among suppliers, the purchasing teams of the automakers have been instructed to include as selection criteria companies that stand out in sustainable practices, in addition to ESG (environmental, social and corporate governance) principles.

Scania has created a logistics laboratory that monitors the parts transportation routes. Guilherme Garbin, the company’s maintenance manager, said that this center helps truck drivers choose less congested routes and take advantage of the space in the trailers for maximum load occupancy. “It’s a constant learning process.”

Inside the vehicle factories, the picture is less complex. Brazil has the advantage of using hydroelectric energy, which gives these companies points in the global decarbonization race. Factories located in countries with low supply of renewable power sources have tighter targets. This lightens the burden on the Brazilian subsidiaries on the one hand. On the other hand, the water crisis has triggered warnings. Solar power panels are already in part of the factories of General Motors in São Caetano do Sul, São Paulo, and of Mercedes-Benz in Juiz de Fora, Minas Gerais. Iochpe Maxion, a Brazilian wheel manufacturer that has become a multinational, includes overseas plants to close its decarbonization account. The company’s line in Thailand already operates partly with solar power.

Iochpe, the world’s largest wheel maker, also has an example of how modifying products based on changing consumer – and industry – habits can help reduce emissions. The company realized that the production of aluminum wheels emits more than three times as much carbon dioxide as the same product made of steel. There are 9 kilograms of CO2 in every kilogram of aluminum wheels, versus 2.3 in steel wheels. The challenge is to offer alternatives or change the habit of consumers who see the sophisticated finishing of aluminum wheels as a consumption dream.

Another similar example comes from U.S.-based Cummins, which used to paint the engines it delivered to heavy equipment manufacturers, such as trucks. “We started to send engines without color, only with varnish, to customers,” said Adriano Rishi, the company’s CEO for Brazil. Nobody complained.

Not all changes, therefore, require high investments. Some ideas are simple and cost little or nothing. “We can stop painting more hidden parts in a car,” said Antonio Filosa, the chief operating officer of Stellantis for South America. The search for lighter materials has also helped, according to Iochpe Maxion CEO Marcos de Oliveira.

The challenge also involves reducing power and water consumption. Between 2003 and 2019, General Motors managed to reduce by 60% the electricity consumption per vehicle and by 2030 it intends to save 35% of the power spent in processes compared with 2010, according to Glaucia Roveri, GM South America’s energy, environment and sustainability manager.

Older plants have been adjusted. With more than 90 years, GM’s facilities in São Caetano do Sul, São Paulo, recently had the press system replaced by more modern technology, which reduced power consumption by 50%, Ms. Roveri said. Because it was located in the city at a time when the region was not very urbanized, this was one of the first factories, at the end of the 1980s, to install a water treatment system for industrial reuse. “Today, we are all living around the factories. People are going to start rejecting products from companies that are not environmentally correct,” she said.

Mercedes-Benz’s plant in São Bernardo, which started operating in 1956, has been receiving equipment that use less electricity and smart lighting systems. “We are in this transformation process since 2018,” said Rafael Gazi, the company’s process planning manager.

ZF, the German auto parts giant, has also adapted its Brazilian facility. According to the regional environmental manager, Celso Guerra, in addition to the exchange of engines and compressors, the company adopted power efficiency modules for the total shutdown or the secondary functions of the machines.

In newer factories, designed with greener solutions, the process is easier. A year ago, Stellantis announced that its plant in Goiana, Pernambuco, achieved carbon neutrality. The vehicle factory had already obtained, in 2017, the gold seal of the GHG Protocol Brasil program, which seeks to encourage companies to quantify and manage greenhouse gas emissions. By 2021, all 16 factories that make up the supplier complex were included. Toyota’s Sorocaba plant, in the São Paulo state, is about to achieve carbon neutrality. The company is, however, waiting for an audit result, said Viviane Mansi, head of sustainability for Latin America.

Waste disposal is another problem in industrial processes. Thanks to the recovery of packaging and better use of organic waste (such as food scraps consumed in the cafeterias, which serve as fertilizer for the gardens) Scania reduced the portion of waste sent to landfills to 6% from 14% in three years. “Our goal is to reach zero,” Mr. Garbin said. The company will soon start its own sewage treatment plant around its plant in São Bernardo.

In vehicle factories, painting is among the activities that demand the most electricity for the process and water for cleaning the equipment when changing colors. The team at Mercedes’ truck cab plant in Juiz de Fora has discovered a new way to clean the supports that carry parts during the painting process. A simple solvent will replace the thousands of liters of water that used to be sprayed when cleaning the parts.

Next to the factory building was an unused shed. There, the company now stores tanks with solvent where the parts are immersed. This is a sustainable process, said Marcos Marsola, process planning manager in Juiz de Fora. The solvent can be reused in the same process. And the leftover paint goes to the cement industry. To complete the process, the roof of the shed received solar power panels. Mr. Marsola even looked for international benchmark, but he couldn’t find any. “This project started from scratch,” he said.

In quality and safety tests of cars, the industry is beginning to replace part of the so-called “crash tests” (in which the vehicles are destroyed) by virtual simulations. This is done by Volks’s engineering team in São Bernardo, for example. Recently, Stellantis invested in a laboratory in the Betim plant that does from material analysis to the final product testing. “The crash test also pollutes as we often sent the cars for tests abroad, which involved diesel consumption in trucks and ships,” Mr. Filosa said. In this case, decarbonizing also helps companies reduce costs.

Financial operations are also starting to be part of decarbonization. At the beginning of the month, Volkswagen reached an agreement with Bradesco to raise debt with ESG commitments. In exchange for funds, the automaker commits to transfer 12% of its CO2 emissions in the production process from fossil to biogenic origin by 2024, and to increase the share of biomethane to 20% of the total gas used by the factories.

New ideas even include employee transport. Volvo intends to reduce CO2 emissions by 30% in employee transport by 2025. According to the company’s CEO, Wilson Lirmann, this involves chartered buses at the Curitiba plant and even remote working. “This is something that the pandemic taught us,” he said. Scania created, for employees who use fleet cars, a corporate card that only allows them to fill up with ethanol.

Despite the several efforts, for the time being, decarbonization plans in this sector have proven to be less organized than its historical and impeccable industrial production system. Companies acknowledge, however, the need to adapt not only the vehicles but also the chain that produces them to the climate urgency. “It’s a matter of survival,” Mr. Garbin said.

Source: Valor International

https://valorinternational.globo.com

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Foreigners at B3 target restricted group of companies

Vale's iron ore attract foreign investors — Foto: Agência Vale
Vale’s iron ore attract foreign investors — Foto: Agência Vale

Despite the good performance of the Brazilian stock market this year, the market gains are concentrated in a restricted group of stocks, the destination of foreign investment in recent weeks. The focus has been on consolidated, liquid companies and not always with fundamentals that justify a long-term bet.

In the year, Ibovespa, the stock exchange’s main index, rose 7.68%, while the Small Caps, which includes companies with smaller capitalization, dropped 0.43%. Of the 90 stocks that make up the Ibovespa, only 39% outperform the index.

The group comprises stocks from the financial, raw materials and energy sectors, which have been the target of global investors. But, according to Valor Data, only ten shares account for 94.4% of the gains accumulated by the Ibovespa in the year. These are securities from companies such as Vale, Petrobras, Itaú, Bradesco, B3, Banco do Brasil, Hapvida and BTG Pactual.

With the exception of Hapvida, all stocks are raw materials exporters or companies in the financial sector. Altogether, they have a total weight of 49.8% in the Ibovespa theoretical portfolio, a fact that further highlights this discrepancy – the other half of the index accounts for only 5.6% of the accumulated gains in 2022.

Also noteworthy is the fact that, of the 90 stocks that make up the Ibovespa, only 35, or 39%, outperform the index. This group also includes stocks from the financial sector and raw materials, in addition to energy shares, the destination of the global investor, who is zeroing out positions in growth stocks.In 2022, foreigners increased their long position in B3 by R$58 billion — institutional investors reduced their position by R$48 billion.

For analysts, part of the foreign flow arrives in the country because the bonds seem cheap, due to the exchange rate. Guto Leite, with Western Asset, says that foreign investors have returned, but have opted for more liquid stocks.

He explains that the external flow, at first, focuses a lot on purchases through ETFs [exchange-traded funds] and this ends up having a greater impact on more liquid companies. “As the scenario is opaque, in general, privileging this type of bonds also makes sense,” says Alexandre Cancherini, manager at Frontier Capital.

For Daniel Gewehr, portfolio co-manager with WHG asset, the Brazilian stock exchange is benefiting from the global movement to search for value stocks, and no longer for growth stocks, after the world’s central banks, especially the Federal Reserve, prepare the monetary policy normalization cycle. “Brazil is perceived as a value market, 70% of the Ibovespa is made up of this type of bonds,” he says. “Russia is also a value market, but due to geopolitical issues, part of the flow that could migrate to that market may be coming to Brazil.”

For André Lion, partner and CIO of Ibiúna Investimentos, it is also necessary to consider the global investor reduced exposure to Brazil, both on the stock exchange and exchange in 2021, and became “underweight”. This global adjustment of positions opened space, therefore, for this investor to return to Brazil, especially attracted by stocks with attractive valuations, such as commodities, banks and steel. “But not everything is cheap,” he warns.

According to Mr. Lion, the Ibovespa is currently traded at a price-to-earnings ratio of 8.5 times, below the historical average of 11 times. Stocks linked to commodities, in turn, are currently traded at 6.6 times, with Petrobras having a price-to-earnings ratio of 5.8 times. But when considering only the group of stocks that are neither of state-owned companies nor linked to commodities – companies that reflect more directly the local economy, therefore – the multiple is higher, at 13.6 times.

In any case, Mr. Lion considers that the conditions for the external flow to continue reaching Brazil is likely to remain in the coming months. He says that, in addition to the fact that the valuation remains relatively attractive, favorable conditions for the exchange rate may even increase, as the Selic policy interest rate rises and the carry trade expands. In addition, with the interest rate hike by the Fed, the movement of migration from growth positions to value stocks is expected to intensify. “The Fed has only started to reduce purchases, soon it will completely withdraw the stimulus. This will have an impact on the market,” he says.

Mr. Gewehr, with WHG, also believes that the flow of external capital is likely continue, but at a slower pace. And it will continue to focus on the so-called “blue chips” [companies with greater liquidity and capitalization]. He says that the Ibovespa’s fair price today is a little below 11 times, according to the price-to-earnings ratio metric, which means that the stock market is still attractive.

“The Ibovespa trades with a 30% discount, while the world has a 10% premium, Brazil is still cheap in relative terms,” he says. “Our global fund chose to have some exposure to Brazil because the stock exchange looks interesting today.”

The negative point, he observes, is the profits projections of the companies that make up the Ibovespa, a fall of 12% in 2022. “In the tripod that investors consider to invest in the stock market, we have a good valuation, and also low allocation. What is missing is an upward revision of profits,” he says. Another risk, he points out, is the behavior of commodity prices. “It’s an investment that makes sense, but it’s risky.”

Source: Valor International

https://valorinternational.globo.com

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Guedes tells G20 Brazil is ready to grow despite subpar GDP projections

Economy Minister Paulo Guedes said at a meeting of G20 finance ministers and central bank chiefs that Brazil is ready for growth, sources say. The two-day hybrid (face-to-face and virtual) meeting ends this Friday.

The debate on the global economy, in which Mr. Guedes and the Brazilian central bank President Roberto Campos took part, was focused on strategies to end stimulus programs adopted to mitigate the crisis generated by the pandemic.

The group of the largest economies is concerned about having a careful exit from support measures. Most G20 countries agree with the reduction of stimulus and gradual normalization of interest rates, sources say.

The Brazilian stance has been to support a gradual, well-communicated normalization of interest rates, sources say.

Observers note that Mr. Guedes has stated in international meetings that many central banks are “asleep at the wheel,” that is, unaware of the dangers of inflation as they should be.

But the minister did not say so this time at the G20, which is chaired by Indonesia. He focused on certain global issues and tried to use Brazil as an example.

Mr. Guedes told his peers that Brazil began withdrawing stimulus last year as it moved forward with overhauls, followed through on the investment partnership program by attracting a record amount of infrastructure investment, advanced on the digital government agenda by seeking to reduce red tape and improving the business environment.

According to Mr. Guedes’s remarks, the result is a more resilient country that is ready to grow – he cited the “best primary result in almost a decade.”

In its latest survey, UBS projected that Brazil’s GDP will grow 0.6% this year, compared with 2.6% in Mexico, 3% in Russia, 3.2% in South Africa, 3.8% in Turkey, 5.4% in China and 8.2% in India.

Source: Valor International

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Jewelry industry recovers, reports 20% growth

Jewelry industry trends. Where does jewelry design go? - Stuttgart Gemstones

The Brazilian jewelry market showed a sales recovery in 2021, having closed the year with a 20% growth in revenues, reaching $4.5 billion. This year, the recovery trend continues, and the sector expects an advance of 10% to 15% in sales if there is no great instability because of elections in Brazil or geopolitical issues in the international market. The information is from the Brazilian Gems and Precious Metals Institute (IBGM).

“A lot of people stopped traveling abroad during the pandemic and this had a positive impact on the sector. The sector benefited from this situation in Brazil,” said Ecio Duarte, head of IBGM. The executive estimates that the sector will resume this year the sales level of 2019. According to data from the Ministry of Economy, imports of jewelry items grew 55% in 2021 compared with the previous year, totaling $64.5 million. Exports from the sector, meanwhile, grew by 10.9% to $146.4 million.

“Last year was a year of growth and market consolidation, with store expansion and omni-channel strategy,” said Otavio Lyra, Vivara’s chief financial and investor relations officer. In 2021, Vivara opened 41 stores, 21 of which are Vivara and 20 of which have the brand Life, reaching 246 stores and 29 kiosks. “This year we will have more openings than last year,” Mr. Lyra said.

Sales in the first nine months of the year grew 56.3% compared to the same interval of 2020 and 20% over the result of 2019, totaling R$916.9 million. Net income increased 220.4% over 2020, to R$171.4 million. The profit margin grew 9.6 percentage points, to 18.7%.

At B3, Vivara’s common shares did not follow the sales performance. In 2021, the shares fell 12.64%, a deeper drop than that seen by the benchmark stock index Ibovespa, which fell 11.93% in the period. This year until Thursday, Vivara is up 2.48%, while Ibovespa rose 8.31%.

Mr. Lyra noted that the company has increased raw material inventory since the end of 2019 and expanded production at the Manaus plant. “We bought the raw materials at the right price. In doing so, we had less impact on the average cost of products,” the executive said.

Another factor that helped the company’s results, according to Mr. Lyra, was the production of more traditional jewelry items, such as rings, half rings, solitaire rings and chains. For 2022, the company expects to have stronger growth than last year.

Monte Carlo Joias, which runs 50 stores in the country, also saw last year a firmer demand for more timeless pieces, such as half rings, chains, yellow gold pieces, and in the jewelry section, diamonds. “For us it was a year of record sales, it was very good. Consumers came back to the stores and online sales grew more than 30% after having a four-fold increase in 2020,” said Renato Balbi, CEO of Monte Carlo.

Monte Carlo reported that it ended 2021 with a 25% increase in total sales. Revenue is kept confidential by the company. For this year, the jewelry store projects growth of 15% to 20% in store sales and 25% in online sales. “The jewelry store that can offer an omni-channel experience gets better results. The larger chains have been more successful in this aspect,” Mr. Balbi noted. Monte Carlo opened five stores in 2021 and plans to open six to eight stores this year. “I believe there is room to get to 200 stores in the long term,” Mr. Balbi said.

Jewelry chain Antonio Bernardo, which operates 11 stores in the country, saw stronger demand for more traditional pieces. “In 2021, we had a stronger demand for gold and diamond jewelry. Jewelry to mark a moment and tell a story,” said Barbara Hermann, Antonio Bernardo’s industrial head. The company did not comment on its sales performance in 2021.

Already the Danish jewelry company Pandora, which has 120 stores in Brazil, saw more expressive sales of silver items and jewelry. The company invests globally in the adoption of artificial diamonds instead of natural diamond, for being more sustainable and having a better cost-benefit relation. “We expect the use of mixed materials such as artificial diamonds to grow. Consumers are already inclined to purchase jewelry made with sustainable sources of gold and silver,” said Martín Pereyra, Pandora’s general manager for Latin America.

The executive said that Pandora does not have results breakdown by country, but that Brazil may contribute to the company’s expectation of global organic growth of 3% to 6% this year. Mr. Pereyra said sales grew in Brazil last year, with “very strong acceleration at the end of the year, which will continue into 2022 and beyond.” Pandora opened five stores in Brazil in 2021 and has plans to open more units in the country this year. But the number is kept confidential.

Roseli Duque, CEO of IBGM, said that the price of jewelry tends to remain stable this year compared to 2021, because of the weakened real against the dollar and the prices of gold compared to last year, which would offset the 10% inflation in the sector over the past 12 months.

The executive added that the trend for this year is for jewelry combining stones of the same color, but with different shades. Rings with coats of arms, initials, cufflinks, cameos and jewelry with frames are among the trends in the current collections. “Jewelry has an air of nostalgia this year. Chains with links, jewelry in yellow gold, pieces made by goldsmiths, everything that refers to traditions gains strength,” Ms. Duque says.

Source: Valor International

https://valorinternational.globo.com

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Reduction of deforestation is off radar of B3 companies

Brazil's Amazon: Deforestation rises ahead of dry season - BBC News

Brazilian companies still fail to place deforestation at the center of their climate concerns. A survey by the consultancy Luvi One shows that only 16% of local companies listed on the stock exchange include the preservation of forests in their climate targets. In Europe, this percentage is 90%. When the specific targets are taken into account, with the definition of deadlines and the percentage of reduction to be achieved, the result is even lower: only 5% make commitments to contribute to blocking deforestation in the country.

“Brazil has debated for a while that the preservation of forests was a matter for governments. The private sector had a minor role in the discussion. Now, the consumer market itself requires that companies position themselves in relation to forests, especially with respect to deforestation in the Amazon,” said economist Felipe Gutterres, CEO of Luvi One.

In the survey, 384 companies listed on the B3 were analyzed. Among the sectors of the stock exchange, the wood and paper companies are among the best positioned – 67% of companies have goals in this aspect, followed by power companies, with 53%. The beverage sector also appears at the top of the list, represented at B3 only by Ambev, which has high targets. In agriculture, half of the companies are committed to reducing deforestation.

The methodology included the analysis of the published reports and the existence of open and specific goals to reduce environmental impacts. It was also verified whether the sustainable development goals of the United Nations and the Global Reporting Initiative (GRI) methodology, which addresses sustainability issues in their annual reports, are met, in addition to the companies’ environmental management acts.

The survey shows that 100 companies on the B3 have the worst performance on the issue of forests, from sectors such as personal use and cleaning products, fabrics, shoes and clothing, computers and equipment. These companies do not have any targets for deforestation reduction.

Despite the initially negative result, the tendency is that the picture starts to change, albeit slowly. Industries in more difficult situations, the issue may be left behind, Mr. Gutterres said. “Whoever is left out of the global trend will also start to notice difficulties in doing business and attracting investments. A natural selection will take place. ESG is not just an acronym, it is a stance,” he said. For the executive, there is a “great generation of value” to be discovered in the preservation of forests with the carbon credit market. According to the survey, 29% of the Brazilian listed companies have gas emission reduction goals. With regard to water-related commitments, the percentage is 24%.

Katerina Trostmann, head of sustainability at BNP Paribas in Brazil, said that companies are understanding that they need to embrace the transition agenda, and this has been happening. “We have seen an acceleration by our clients to adopt targets and be transparent. One trend for 2022 is climate transparency,” she said.

Source: Valor International

https://valorinternational.globo.com

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Ambev seeks higher hop production in search of perfect beer

Ambev vai aumentar preço da cerveja em outubro

After leaving his job at the stock exchange, Alexander Creuz, 46, from São Paulo, met again ABEV3 — or rather, Ambev — in the countryside of the state of Santa Catarina, now as a supplier of hops for the production of the Brazilian company’s beers.

Leaving decades in the financial market and life in the largest metropolis in Latin America to study agribusiness and become a rural producer was not an easy decision, but Mr. Creuz says he only regrets not having done it sooner. And the accounts show that the choice was positive.

The production of hops has a significant cost to implement, but net profit projections varies between R$70,000 and R$ 80,000 per hectare, according to him. If all goes as planned, with the first full crop being harvested this year, the return on investment should come within 40 months.

The fact that the required area is small was decisive for the option for hops — Mr. Creuz’s property, located in Lages (Santa Catarina state), has 12 hectares. “To have this profitability with soy, for example, I would need much more area,” he explains. Research indicates that the profit with soy is around R$2,000 to R$3,000 per hectare.

Hop is a plant of the species Humulus lupulus, of the family Cannabaceae. It is native to Europe, western Asia and North America. Being a vine, it usually reaches between 4.6 and 6.1 meters in height.

In beer brewing, during the cooking process with malt, water and yeast, the plant releases bitter-tasting resins, giving the beverage its characteristic flavor. Hops are also a natural preservative. In the past, it was added to beer kegs after fermentation to keep the beverage fresh while it was being transported.

Today, practically all the hops used by the country’s breweries are imported. Last year, the industry spent $82 million on the purchase of 4,721 tonnes of hops from other countries, according to data from the Secretariat of Foreign Trade (Secex).

According to a survey by the Brazilian Association of Hop Producers (Aprolúpulo) released last year, the cultivated area in the country is just over 40 hectares, and production is around 24 tonnes.

The largest brewery in Latin America, Ambev wants to encourage an increase in hops cultivation in Brazil. Mr. Creuz says the help is more than welcome. “It’s one thing for me, an individual, to knock on the headquarters of Epagri [Santa Catarina’s technical assistance agency] and ask for technical aid. Another thing is Ambev”, jokes Mr. Creuz, a former president of Aprolupulo.

Mr. Creuz is part of Ambev’s Fazenda Santa Catarina project, which began in 2020 and, since then, has carried out management and varieties tests that increase productivity and guarantee income. In the second half of last year, Ambev started producing and donating seedlings to producers.

“We hope to foster these local economies, in addition to producing better quality beer by having fresher hops,” says Laura Aguiar, Ambev´s head of Knowledge and Brewing Culture. According to her, the project’s first significant crop is expected to be harvested this year, but there are no volume estimates.

The company is also recruiting help to boost cultivation. At the end of January, it announced a partnership with Silver Hops, an agtech created within Fazenda Pratinha, in the region of Ribeirão Preto (state of São Paulo), with focus on technologies for hops.

“Our role will be to complement the work that is already being done with family farming through the perspective of research and innovation”, says Silver Hops’ head José Braghetto Neto.

Source: Valor International

https://valorinternational.globo.com

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Development bank raises R$1.9bn with JBS block trade

A cruzada inócua e cara de Bolsonaro contra o BNDES

The Brazilian Development Bank (BNDES) pocketed almost R$1.9 billion on Wednesday with the sale of another slice of its shares in JBS. In a block trade coordinated by BTG Pactual, the state-owned bank disposed of 50 million shares. Since December, BNDESPar, the bank’s equity arm, has raised more than R$4.5 billion with the sale of JBS shares.

The shares were traded at R$37.52, the price of the firm guarantee given by BTG. A source who followed the operation said that JBS bought shares again, which signals that the meatpacking giant still sees a large discount on its market capitalization.

In December, when BNDES started divestments in JBS with the sale of 70 million shares, the company took virtually all the shares for R$38.01 each, disbursing more than R$2.5 billion. BofA was the coordinator of the block trade.

With this Wednesday’s sale, BNDES reduces the position in JBS to less than 20%. The bank’s bet on the company was quite profitable. Since 2007, BNDESPar has invested R$8.1 billion in JBS, overperforming Brazil’s benchmark stock index Ibovespa, interbank deposit rate CDI and the goal of the development bank’s pension fund.

As the BNDES continues to reduce its position in the company over the next few months, JBS will be able to get rid of the overhang that weighs on its shares.

Analysts believe that JBS is trading at a discount considering the positive moment, especially in the United States. Last week, analysts Thiago Duarte and Henrique Brustolin, with BTG Pactual, revised the target price for the stock to R$55 from R$50, which embeds a potential for appreciation of more than 45% over current prices.

According to the analysts, JBS shares trade at a multiple of 3.7 times the projected EBITDA for 2022 and 4.6 times for 2023, which is 20% below the historical level.

JBS is currently valued at R$88 billion on the stock exchange. The BNDES’s position is worth R$17 billion.

Source: Valor International

https://valorinternational.globo.com

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State governments investments grew 83.6% compared to 2020

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

State governments investments grew in 2021 at vigorous rates not only compared to 2020 but also to 2017, the year before last of the Michel Temer administration’s term. Investments in the 26 states and the Federal District Brasília last year totaled R$75.9 billion, with a real increase of 83.6% compared to the previous year. In comparison with 2017, the real increase was 46.6%.

The data shows that the growth in revenues due to extraordinary transfers in 2020 and the good performance of the collection last year provided resources for a resumption of investments at a higher level than in the previous term. For this election year, part of the states is already planning to go even further with investments. Roads and infrastructure in the areas of health, education and security are among the priorities.

The investments’ growth rate stands out even more taking into account the behavior of the main expenses groups. Spending on personnel and social charges by the states in total fell by 5.2% in real terms in relation to 2020 and 5% in relation to 2017. In the same comparison, current expenses rose 2.9% against the previous year and fell 0. 5% compared to 2017. Current revenues soared. Considering all the 26 states and the Federal District, these revenues totaled R$1.03 trillion 2021 — up 8.1% over the previous year and 13.5% over 2017.

For specialists, the investment scenario was provided by an extraordinary outlook that led to revenue growth and large cash balances. They point out that the factors that allow the increase in revenue are temporary and caution is needed in the application of these resources.

Juliana Damasceno, researcher at Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV) and economist with Tendências, recalls that the transfers of resources intended to combat the pandemic in 2020 to states and municipalities exceeded R$89 billion and ended up, in many cases, going beyond the recovery of lost revenue that year. Additionally, last year, she says, the combination of exchange rate, inflation and commodity prices also favored State revenues, both through their own collection and through mandatory transfers from the federal government.

“Many states saw their coffers full,” says Ms. Damasceno. The concern, she says, for future terms, is that the current situation will result in spending decisions that will permanently impact state expenditures. What can already be seen, she points out, are pressures for salary readjustments in this election year.

Gabriel Leal de Barros, chief economist at RPS Capital, points to similar fears. In addition to payroll expenses, some investments can also lead to an increase in mandatory costs. Works such as hospitals, he points out, are an example. The concern, he says, is that not all states have taken structural measures to contain spending. The evolution of personnel expenses, which fell in real terms in the total of last year, was favored by conjunctural factors. The expenditures of the previous term, he says, suffered with the contraction of resources.

And in the last two years, says Mr. Barros, personnel expenses ended up being limited by Complementary Law 173, of 2020, the same that determined the extraordinary transfers of resources from the federal government to tackle the economic effects of the pandemic. This law, he explains, restricted the salary readjustment until the end of 2021. He points out, however, that some states have implemented social security and administrative reforms that are already beginning to show results.

Part of the states that advanced with investments last year intend to continue on the same route this year. In São Paulo, according to data from the state’s fiscal report, investments stated in the reports totaled R$17.9 billion in 2021, with a real increase of 98.3% compared to the previous year and 35.4% against 2017.

State Finance secretary Henrique Meirelles says that if you add up the financial investment accounts, which, in the case of São Paulo, he says, corresponded to investments, the total amount comes close to R$26 billion. According to him, this should be increased to around R$40 billion in 2022. “There are 8,000 works already underway, including roads, schools, hospitals and in the area of public security, generating 200,000 jobs.” A good part of the investment this year, he says, will be financed by the state government’s cash balance. According to Mr. Meirelles, at the turn of 2021 the state’s cash position was R$47 billion. Contributed to this result, he says, the administrative reform, which helped to keep expenses contained.

Last year, according to fiscal reports, São Paulo’s current revenues advanced 9.4% in real terms compared to 2020. This year, Mr. Meirelles does not expect the same performance.

Source: Valor International

https://valorinternational.globo.com

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Foodtech raises $100m for “plant-based chicken”

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Next Gen Foods, a plant-based chicken startup founded by former BRF executive Andre Menezes and Timo Recker, has just written a new chapter in the global foodtech industry. Just over six months after celebrating the biggest seed of a plant-based startup, when it raised $30 million, the owner of the Tindle brand broke barriers again.

The Singapore-based foodtech has raised $100 million in the biggest series A round ever by a company of its kind. The round included the participation of Alpha JWC, a venture capital manager in Southeast Asia, EDBI and UK-based MPL Venturesa. Temasek, GGV Capital, K3 Ventures and Bits x Bites, which were already investing, followed suit. The valuation was not disclosed, but the startup claims that the amount exceeds “well” the $180 million valuation of the seed.

The round also marks the debut of Tindle in the United States, significantly expanding the footprint of Next Gen Foods. “Adding up the population of all countries, we could serve less than 50 million inhabitants. But the U.S. has more than 300 million. You can already have a sense of expansion,” Mr. Menezes, CEO of the startup, told Pipeline, Valor’s business website.

With a strategy initially focused on restaurants, a way to convince those attracted by famous chefs about the potential of cooking with plant-based chicken, Tindle was already in restaurants in Singapore, Malaysia, Macau, Hong Kong, Dubai and Amsterdam. The idea is to reach retail only in 2023.

Upon landing in the U.S., Next Gen Foods surprised skeptics who doubted the company’s expansion speed. “I came here at the end of September, after the launch in Dubai. Our crazy ambition was to make the launching in the first quarter, which we did, but a lot of people said it wasn’t realistic,” recalls Mr. Menezes.

Living in Chicago to prepare for the arrival of the startup, Mr. Menezes worked on the various fronts necessary to bring the product to the United States, which includes the import process — the outsourced factory is in the Netherlands —, definition of the storage and distribution structure and prospecting of restaurants that already have dishes with Tindle on their menu. “We already have dozens of restaurants we’ve talked to, and we’re in talks with hundreds,” he said.

Starting this Tuesday, Tindle will be in select restaurants in California, New York, Miami, Philadelphia, a process that included long conversations with chefs to develop recipes. Unlike the traditional plant-based industry, Tindle does not come in a defined format — a hamburger, for example — but as a kind of modeling clay that allows for several uses, from breaded and fried product to a chicken breast dish.

The ambition of Next Gen Foods is to become the benchmark in plant-based chicken meat for restaurants and consumers, just as U.S.-based startups Impossible Foods and Beyond Meat were to the plant-based hamburger, virtually inventing a category. To date, no plant-based chicken meat has achieved the consistency needed to establish itself in the market, a gap that Tindle wants to fill.

The United States are expected to become the biggest market for the startup in a short time. “The receptivity of the product tests was incredible,” Mr. Menezes said. The expectation is that Americans will represent 60% to 80% of the revenues of the startup – of undisclosed value – in 2022.

Next Gen Foods has an asset to gain broad bases in the U.S. The startup cut a deal with Dot Foods, the largest food redistributor in the U.S., which in theory allows it to take Tindle to any restaurant in the country. “A contract usually takes years because they only take companies that operate with an already reasonable income, which is not our case yet. They reach 3,000, 4,000 restaurants,” Mr. Menezes said.

The debut of Next Gen Foods in the United States will test the doubts of part of the market with the growth of the plant-based segment. After a jump in the first year of the pandemic, the category stagnated last year and sales even dropped in a few months, which put some companies in the hot seat. Beyond, once a reference, became the target of short sellers.

Mr. Menezes does not ignore the scenario, but considers that both the euphoria of 2020 and the disappointment of some with the slow growth of last year reflect hasty assessments. “Any analysis done with such a short lens is inherently wrong,” he said. The game is long term, measured in decades. In this trajectory, the company bets that products like Tindle will fill a more significant space in the $350 billion global chicken market.

For now, plant-based alternatives like Next Gen Foods still account for a tiny share of the market — in the case of chicken, less than 1% — and are more expensive. In restaurants, dishes with Tindle are up to 15% more expensive than the traditional chicken options on the menu. “The scale discrepancy is very bizarre. A very large plant-based factory produces in a year what an average chicken factory does in a month”, compares Mr. Menezes.

With the gains of scale that will come with time, however, the prices of the plant-based industry also tend to fall, becoming more competitive in the competition for consumers. In a world that will need more food using fewer natural resources, the expansion of plant-based meat seems inevitable. “Livestock cannot be the only tool to feed 10 billion people in 2050 because there is no natural resource available,” summarizes the CEO of Next Gen Foods.

Source: Valor International

https://valorinternational.globo.com

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Rappi goes back to antitrust watchdog against iFood

Thalyta Dalmora - Blumenau, Santa Catarina, Brasil | Perfil profissional | LinkedIn

Just over a month after Uber announced it will operate in the Brazilian food delivery market only until March 7, delivery company Rappi filed a new petition with the Administrative Council for Economic Defense (Cade), Brazil’s antitrust regulator, defending the termination of all exclusivity contracts held by iFood with restaurants and bars.

In the document, Rappi asks the watchdog to review a provisional measure from March last year, which establishes the blocking of new exclusive contracts of iFood with restaurants, keeping the agreements prior to the determination.

Until September last year, iFood had 80% of the food delivery market in the country, followed by Uber (25%) and Rappi (18%), according to data from the Brazilian Association of Bars and Restaurants (Abrasel).

Uber’s exit from this sector and the shutdown of the Delivery Center are Rappi’s main arguments to request the reopening of the case by Cade. The Delivery Center was a service focused on restaurants and shopping malls stores, which had BRMalls and Multiplan among its partners – it closed the operation in November.

According to Rappi, the moves are “evidence that, even with the preventive action of Cade, the practices of iFood continue to damage the market, requiring the adoption of new restrictions by the regulator.”

The president of Abrasel, Paulo Solmucci, criticized Rappi’s position in defending only the end of iFood’s exclusivity with stores because the company also operates with exclusive contracts.

“If Rappi was genuinely in a pro-market movement it should enter as an interested third party in our lawsuit and ask for the end of exclusivity as a whole,” Mr. Solmucci told Valor.

Abrasel filed its own request in December 2020, advocating for an end to all exclusive contracts between food delivery apps — in addition to enter as an interested party in Rappi’s lawsuit against iFood with Cade in September. “The genuine speech that Abrasel would applaud is that of a healthy market and free competition,” says Mr. Solmucci.

The new petition filed Tuesday by Rappi asks Cade to suspend the requirement of a termination fine for the breach of exclusivity of all contracts concluded by iFood with restaurants. “In the case of contracts that have specific investments in infrastructure, the rescission fine may not exceed the amount invested.”

The document also mentions a recent decision by the Norwegian competition authority to prevent Delivery Hero, which operates the online delivery platform Foodora in that country, from entering into exclusive contracts with stores for a period of three years.

In a note, iFood said that “the online delivery market is constantly evolving, with frequent entry of new competitors and the emergence of new business models,” that its commercial policies “are in strict compliance with the competition legislation” and that it “will continue to cooperate with the authorities in charge of the matter.”

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