Revenue from extractive industries to double by 2030

Oil, natural gas and iron ore will generate higher-than-expected collection, according to calculations by think tank Ibre/FGV

06/07/2022

Braulio Borges — Foto: Ana Paula Paiva/Valor

Braulio Borges — Foto: Ana Paula Paiva/Valor

The federal gross collection of revenues related to extractive industries – especially oil, natural gas and iron ore – is seen as reaching an annual average of 2.11% of GDP between 2022 and 2030, more than double the average rate of 0.92% of GDP per year seen from 2011 to 2020. The calculation by economist Braulio Borges, a researcher at Fundação Getulio Vargas’s Brazilian Institute of Economics (FGV/Ibre), conservatively considers a barrel of oil traded at $65. The additional collection would total R$1.03 trillion at constant values from this year through 2030 compared to the previous decade.

Mr. Borges ponders that the scenario involves volatility and contingencies, such as those related to oil prices and the production curve. He also highlighted that these additional revenues have not yet been considered in the longer-term fiscal projections, whether internal or produced by international organizations.

According to his analysis, in 2021 the extractive industries will expand gross federal revenues by around 1% of the GDP. With that help, that federal revenue reached 22.3% of GDP, up from 21% on average from 2014 to 2019. In the 12 months through March 2022, he said, the total federal collection reached 23.2%, which indicates a new increase this year. The recent movement was driven by the high international prices of these commodities impacted by cyclical factors.

Even as prices expected for the next two years are adjusted, these items are expected to continue increasing tax collection until 2030, Mr. Borges said. In this longer term, the revenues from extractive industries will be based on the increase in production volume and driven by already defined taxes, which is expected to gain ground due to the increase in the share of oil and gas extraction under the sharing regime.

Experts warn that the high volume of revenue coming from this temporary change, although lasting and based on finite resources, should not be seen as a panacea. This additional revenue, they point out, requires careful allocation by the federal government.

According to Mr. Borges, even in a scenario of a lower oil price, of $45 a barrel of Brent, the federal gross revenue from the same activities would yield an annual average of 1.68% of GDP from 2022 to 2030, still more than 0.7 percentage points above the average annual rate seen between 2011 and 2020. Considering a barrel at $85, the federal revenue would be 2.6% of GDP on average annually.

Mr. Borges’s calculation shows that in 2021 the total revenue from royalties, special participations, dividends paid by Petrobras to the state and taxes paid by the extractive industries, except social security contributions, totaled 1.85% of GDP, higher than the average of 1.06% of GDP from 2018 to 2020 and 0.93 percentage point above the annual average from 2011 to 2020. The performance largely explained the jump in total federal gross revenues in 2021.

Revenues from royalties and special participations grew to 1.08% of GDP in 2021 from 0.76% the year before. Petrobras’s dividends reached 0.24%, the highest rate relative to GDP since 2001. Federal taxes complete the picture. Revenue from taxes and contributions from extractive industries, including oil, yielded 0.52% of GDP for the state in 2021, almost double the 0.27 percentage point seen in the previous year.

The revenue projection, Mr. Borges said, shows that the extractive industries will continue to increase the state’s gross revenue until the end of the decade. The expected increase in production, especially of oil, natural gas and iron ore, is expected to contribute to this. These three commodities represent virtually 89% of the royalties collected from natural resource exploration in Brazil. The projections are included in a study that is the subject of an article by economist Luiz Guilherme Schymura, to be published by Ibre in the magazine “Conjuntura Econômica.”

In the study, Mr. Borges considered the 10-Year Energy Expansion Plan 2031, in which Energy Research Company (EPE) projects growth of little more than 80% in the production of oil and gas by 2030, with an increase from pre-salt exploration. This comes in the wake of production growth of 50% in the last decade and expansion of 150% in 20 years. Iron ore production is expected to grow 30% by the end of the decade, considering mining giant Vale’s estimates.

Another factor that will contribute to revenue growth is the so-called “profit oil,” a still small collection for the state established when the sharing regime was created, in 2010. That meant an increase in taxation on the extraction of oil and natural gas, Mr. Borges said. As production subject to the sharing regime is expected to increase, the revenue from profit oil, almost insignificant until 2021, is likely to grow until 2030.

Based on data from PPSA, the state-owned company created to represent the state in the sharing contracts, Mr. Borges projected the impacts on revenue. “It is worth saying that two-thirds of Brazil’s oil extraction in 2030 is expected to be under the sharing regime.”

Royalties, special participations, Petrobras dividends and revenues from profit oil combined are expected to reach 1.7% of GDP between 2022 and 2030 on average. Last year, it was 1.33% of GDP. In the 10 previous years, the annual average was 0.7%. For 2030, the projection is 2.25% of GDP – considering, as previously mentioned, a barrel of Brent crude oil at $65. The collection of federal taxes paid by extractive industries is expected to add 0.4% to 0.45% of GDP on an annual average from 2022 to 2030, totaling 2.11% of GDP in this period.

The most recent rise in the contribution of extractive industries to the state’s gross revenue is due in large part to the surge in commodity prices, under the impact of the pandemic and, more recently, the shock of the Russia-Ukraine war. Because of this, Mr. Borges said, the expected adjustment in prices is likely to drive down tax collection linked to extractive industries over the following two years, with a minimum level projected for 2024 at 1.6% of GDP.

From 2025 on, with the increase in domestic production of oil and gas, these revenues are likely to rise again and reach 2.71% of GDP, considering the baseline scenario with Brent crude at $65 a barrel.

Even with the energy transition, Mr. Borges said, oil demand is expected to still be high for 15 to 20 years, and “Brazil is well-positioned to meet this demand.” At the same time, he says Brazil has the third-largest nickel reserves in the world, a production that can grow a lot if the energy transition accelerates and boost royalty collection. This was not included in the projection, he said.

Mr. Borges points out that this commodity windfall brings volatile revenues based on finite natural resources. “A number of factors can make oil extraction in Brazil grow more or less,” he said. “The additional revenue will apparently materialize between now and the end of the decade, but it is not necessarily eternal. The projections, in fact, are that in the decade following 2030 Brazilian oil production will start to fall.”

Source: Valor International

https://valorinternational.globo.com/
/by

Cellera teams up with Ferring for innovative medicines

Agreement includes production, commercialization of gastroenterology product

06/07/2022

Omilton Visconde Junior and Rafael Suarez — Foto: Celso Doni/Valor

Omilton Visconde Junior and Rafael Suarez — Foto: Celso Doni/Valor

Brazil’s Cellera Farma has signed an agreement with the Swiss laboratory Ferring for the production and commercialization of an innovative medicine for gastroenterology healing, in the first step of a partnership that may be more comprehensive in the future.

For Cellera, whose controlling shareholders are businessman Omilton Visconde Júnior and private equity manager Principia Capital Partners, this first project represents technology transfer, occupation of the installed capacity of the Indaiatuba plant, in São Paulo, and a new jump in revenues, with the right of the first choice for commercializing the new drug.

Ferring, which is present in 56 countries, now has local production of one of its drugs and will use Cellera’s broad bases to take it to health professionals and pharmacies throughout the country. The biopharmaceutical company, specialized in fertility, gastroenterology and urology, has placed one of its 12 innovation centers in Brazil and wants to advance in research and development locally.

The new drug — a gel that combines two existing molecules to accelerate the healing process of anal fissures and control pain — was developed in the country, at Ferring’s center. In future projects, Cellera may even join the multinational at this stage.

The drug will enter phase 3 of clinical studies in 2023 and may reach the market in mid-2025. So far, investments in the product have reached between R$15 million and R$17 million, and more R$5 million are likely to be spent until registration at the health regulator Anvisa. In the launch phase (“go-to-market”), investments are estimated at R$50 million. “The product will be important for both companies,” said Rafael Suarez, Ferring’s CEO in Brazil and leader for Latin America.

According to the multinational, the choice of Cellera as a partner took into account the quality of its productive assets, which meet the requirements of international agencies, and the willingness to invest in innovation. Besides that, the proposal is that the drugs developed by the partnership can be internationalized without the need to repeat clinical studies abroad, said Renato Faro, head of R&D and regulatory affairs at Ferring.

Omilton Visconde Júnior, CEO of Cellera, says that the Brazilian pharmaceutical company bets on partnerships to grow, at the same time avoiding exposure to commoditized products, in line with what Ferring has to offer. With operations in the central nervous system (CNS) and gastroenterology fields, the pharmaceutical company has some participation in pediatrics and is evaluating the entrance into orthopedics. “Our focus is innovation,” he says.

Mr. Visconde Júnior became known for his sequential ventures in the health sector in the country. Among other moves, he sold Biosintetica to Aché in 2005 and, years later, he sold Segmenta, of hospital serums, to Eurofarma. In 2017, he and his private equity partner formed Cellera, the result of the purchase of Instituto Terapêutico Delta and the company MIP Brasil Farma.

For this year, the Brazilian pharmaceutical company is expected to reach R$500 million in revenues, 10 times more than in 2017. The plan, according to the businessman, is to seek an IPO when the company reaches the R$1 billion threshold, in three to four years.

Ferring, formed in 1950, belongs to a single owner and has been in Brazil since 1985. Worldwide, the group has revenues of $2 billion and invests 20% of its revenue per year in R&D, said Mr. Suarez.

Source: Valor International

https://valorinternational.globo.com/
/by

Global economic outlook boosts share buybacks in Brazil

May is second-busiest month since 2020 in Brazil, with 21 companies launching such programs

06/07/2022

São Paulo-based B3: stocks are going through strong correction in 2022 — Foto: Aloisio Mauricio/Agência O Globo

São Paulo-based B3: stocks are going through strong correction in 2022 — Foto: Aloisio Mauricio/Agência O Globo

Faced with volatile markets that are sensitive to the global economic scenario, stocks are going through a strong correction in 2022 and companies in several industries, in Brazil and abroad, are launching share buybacks as a result.

In Brazil, share buyback announcements accelerated in May, with 21 companies starting buying back shares, almost four times the number seen in the same month of 2021. This reflects the Ibovespa – Brazil’s benchmark stock index saw the second-worst performance since the onset of the Covid-19 pandemic by falling 10.1% in April.

May was still the second month with the most open programs since March 2020, when the coronavirus triggered an unprecedented global crisis.

This year, 57 companies unveiled buyback programs, more than half of the entire 2021 volume of 108 announcements. The number is 63% higher than the number announced between January and May last year, which had most of the openings concentrated in the second half of the year.

If completely fulfilled, the buyback programs can total R$72 billion, taking into account the current price of the companies. The operations announced in the month alone cover a volume that may exceed R$17 billion if fully executed. Gerdau, CSN, Suzano, JBS, Bradesco, XP, Cosan and Hapvida are among the groups that started buyback programs in May.

This is not a local phenomenon. Share buybacks in the United States are expected to reach a record of $1 trillion in 2022, as companies see their shares depreciating between 15% and 30% in the year to date.

Guilherme Tiglia, a partner and analyst at Nord Research, cites escalating global inflation, the Russia-Ukraine war, the Covid-19 pandemic, and reduced growth in major economies such as the United States and China among factors driving buybacks.

“At times like this, when we see the [financial] market moving sideways and concerned about the global economy, a window of opportunity opens up for companies to do buybacks. It’s a market moment, with discounted stocks,” he said.

He points out that, in the local scenario, there is still the impact of the high interest rate, which reflects strongly on variable income due to the migration of investments to fixed income.

Besides the drop in stock prices, the strong cash reserves of some Brazilian companies — after higher revenues in 2021 — contributed to driving buyback programs last month, said Gabriela Joubert, chief analyst at Inter.

“Companies, especially those linked to commodities, which have revenues in dollars, have a cash surplus. They need to allocate this money. After so many [announcements and payments of] dividends, buyback is also an alternative,” Ms. Joubert said, stressing that stock buybacks are another way of returning profits to shareholders.

The analyst notes that, for the investor, the buyback plan contributes to containing share losses, at first. “We are entering a bear market, so it makes sense for companies to announce buybacks,” she said.

Vale, at the end of April, paved the way for more robust programs with the announcement of a buyback of up to 500 million shares — equivalent to more than R$40 billion — expected to continue until the second half of next year.

In a conference call with analysts held after the announcement of the program, the chief financial and investor relations officer, Gustavo Pimenta, said that the share buyback “is the best investment” the company has, adding that this does not mean the mining company will not pay extraordinary dividends.

“It will depend on the cash flow. We can do both [dividend and buyback], but the buyback has a great prospect,” the executive says.

Ms. Joubert says she disagreed with the buyback announced by the company in October last year, of up to 200 million shares — a program finished this month with the acquisition of all shares for the opening of the current buyback — since it could have been converted into dividends for shareholders.

According to her, Vale wanted to send a message of confidence in the company. “Companies continue to pay dividends, but they also buy shares, sending the message that they are investing in themselves. The message is unanimous. I have surplus cash, I will pay you dividends. But I will also buy shares of my company and do the same, shareholders,” the analyst with Inter said.

Mr. Tiglia, with Nord Research, considers that the share buyback is also a benefit and that, at that moment, it was an allocation of funds that made sense for the company’s strategy.

“There is no such thing as a better or worse proceed. I believe that, at that moment, Vale understood that its shares were cheap, which is consistent with the robustness of the program, and the buyback was the tool that made the most sense in that scenario,” the analyst said.

Daniel Sasson, a commodity analyst at Itaú BBA, said that the program is in line with Vale’s recent positioning, in which it sees no need for investments and expansion in the coming years.

“Therefore, the company is using this surplus by returning cash to shareholders. Another issue is that Vale shares are cheaper compared with its global peers. The company sees this, that stocks are cheap,” he said.

Mr. Tiglia says that Vale shares are at a level below what they could be, even with gains of more than 17% in the year.

Some programs launched in May, weeks after Vale, have the potential of reaching R$1 billion each, including Suzano, CSN and Gerdau.

Gerdau’s chief financial and investor relations officer, Rafael Japur, evaluated that the repurchases of the company and Metalúrgica Gerdau reflect the steelmakers’ cash generation capacity. “We understand that the shares are undervalued in recent months and that the discount is important concerning our peers in North America. That’s why we started the program,” Mr. Japur said.

Ms. Joubert, the executive with Inter, however, highlights the post-purchase and wonders about the company’s goal. “We need to pay attention to what the company will do with that number of shares it bought. Will it cancel it, will it keep it, or will it do a secondary offering to raise money again?”

Mr. Tiglia, the analyst with Nord, said that buybacks can reflect negatively on stock liquidity. “There are programs that don’t change, while others mess a lot with liquidity,” he said. “At the end of April, Vale, for example, had 305 million in treasury stock. The natural path is that it cancels those shares in the coming months and the market is already expecting this,” said Mr. Sasson, with Itaú BBA.

Source: Valor International

https://valorinternational.globo.com/
/by

Government proposes reducing tax rate on fuel to zero

States would be compensated, according to plan; measure would be in place by December

06/07/2022

Jair Bolsonaro — Foto: Antonio Molina/Fotoarena/Agência O Globo

Jair Bolsonaro — Foto: Antonio Molina/Fotoarena/Agência O Globo

In another effort to try and lower inflation and reduce fuel prices — less than four months before the election — President Jair Bolsonaro proposed Monday to reimburse states if governors agree to reduce to zero sales tax ICMS on diesel and LPG (cooking gas).

In addition, the federal government has committed itself to cut to zero social taxes PIS and Cofins and the federal tax Cide levied on gasoline and ethanol. The package is a compensation for Congress to pass the bill that curbs state taxes on fuel, energy and telecommunications to 17%.

The tax breaks and compensation will be proposed through a constitutional amendment proposal (PEC) to be issued by the federal government, with defined financial and time limits. According to sources within the economic team, the total cost will be around R$40 billion.

Of this total, R$25 billion — concerning the transfer to state governments for the loss of revenue from the ICMS tax on diesel oil and cooking gas — will be kept outside the spending cap. The remainder – around R$15 billion – derive from the total exemption of PIS/Cofins and Cide on gasoline and ethanol. Those federal taxes have already been reduced to zero, previously, for diesel and LPG.

As for the duration of the measure, the PEC will say that the measures will be in force between July 1st and December 31st, 2022. Nevertheless, the government is confident that the increased revenues from oil royalties and dividends from Petrobras will contain impacts on the primary result. Economy Minister Paulo Guedes said the effort will be “fiscally responsible.”

“It is an extraordinary transfer of funds. It has a defined time, until December 31, and a defined value, it will be clear that this is fiscally responsible,” he pondered. Mr. Guedes also explained that there are extraordinary revenues not yet released in the budget, and that this transfer to the entities will be limited to these revenues. “In the same way that there must be a spending cap, there must be a tax cap,” he said.

Mr. Guedes called for a joint effort on behalf of a reduction in fuel prices that protects the population. “If the economy became strong again and tax collection is increasing, we are behaving in a way to transfer this to the population. Everyone has to collaborate. States and municipalities are all in the black, a situation they have never been in before,” he said. “We are renewing our commitment to protect the population with the cooperation of federal entities, Senate and Chamber.”

The announcement of the package was made by the president in the presence of government ministers and the speaker of the Chamber of Deputies, Arthur Lira (Progressive Party, PP, of Alagoas), and Senate President Rodrigo Pacheco (Social Democratic Party, PSD, of Minas Gerais), who also endorsed the measure.

In practice, the package is a way for the Executive branch to pressure governors to accept an agreement on the issue. This is because allies of the president have shown concern about high inflation, which tends to impact the approval of the president during the election campaign.

With this proposal, President Bolsonaro admitted expecting an “agreement” in the Senate for the approval of the so-called complementary bill (PLP) 18/21, already passed by the Chamber of Deputies and making its way in the Senate, which establishes a cap for the collection of ICMS for items considered essential, such as fuel, electricity, telecommunications and public transport.

“The government has decided to move forward with the reduction of the tax burden for Brazilians — on diesel and cooking gas, if the governors understand that it is possible to reduce ICMS to zero, we will reimburse them for what they fail to collect. As for gasoline and ethanol, the federal government is willing to reduce PIS/Cofins and Cide to zero,” Mr. Bolsonaro said.

Mr. Lira also admitted that the negotiation is primarily aimed at solving the problem of inflation, which worries Mr. Bolsonaro’s allies. “We are concerned about reducing the impacts of inflation, the crisis caused by pandemic and war. The Chamber is sensitive to the government’s effort,” said Mr. Lira before sending a message to senators. “We hope that the Senate has sensibility in the approval of PLP 18 [which limits ICMS to 17%]. After that, we will deal with the PEC on the reimbursement of the states,” he said.

The Senate president said he expects a consensual solution and through dialogue to reduce the ICMS on fuels, but reiterated the existence of the states’ concerns and did not talk about a date to vote on the bill that imposes a 17% ceiling on gasoline and diesel oil, among other items.

According to him, the government’s initiative highlights the concern of the branches of government with the prices of fuel and food. “It is a very serious problem,” he said. Mr. Pacheco recalled that the state governments took to the Senate several amendments to the PLP 18: “Within the dialogue, which is very broad in the Senate, we will seek consensus on all interests, also listening to the states. We welcome the demands of the federal government and will take them to the senators for analysis,” the Senate president added.

São Paulo’s Treasury Secretary Felipe Salto defined the announcement as “a bad joke.” “The states don’t have any guarantee,” he said. Mr. Salto questions the source of funds for such compensation. “The only revenue cited does not exist: the Eletrobras concession. How will they reimburse [states] with the cap there?” he said.

Another criticism from the state secretary is that first the bill that establishes the ceiling on the collection of ICMS on fuels would be approved, and then a PEC would be sent to the states to account for the reimbursement.

“The losses from PLP 18 will come and the PEC will be delayed. Even if approved, nothing guarantees the reimbursement, according to the announcement,” he said. According to him, the measure would generate losses of R$14.4 billion by locking the rates at 17% — 18% in the case of São Paulo.

(Anaïs Fernandes contributed to this story.)

Source: Valor International

https://valorinternational.globo.com/
/by

Inflation, supplies are L’Oréal’s priorities

Company has double-digit growth in Brazil and gains market share with consumers loyal to the brands

06/06/2022

Alexis Perakis-Valat — Foto: Leo Pinheiro/Valor

Alexis Perakis-Valat — Foto: Leo Pinheiro/Valor

Brazil was the first country that Alexis Perakis-Valat, global CEO of L’Oréal’s division for the general public, visited when he took over the position five years ago. Last week, Mr. Perakis-Valat returned to Rio de Janeiro and São Paulo. Even though sales have resumed to pre-Covid-19 levels, the scenario is different from before 2020. Global inflation and supply issues are of concern. He says the business in Brazil has had double-digit growth and it is gaining market share in an environment of consumers loyal to the brands.

The large public division includes Niely (a national company incorporated into the French group in 2014), Colorama, which focuses on nails, and Maybelline, of makeup. The products are found in retail channels, such as supermarkets, pharmacies, and cash-and-carry. In 2021, the area was responsible for 37.9% of L’Oréal’s global sales, behind only the luxury segment, which accounted for 38.2%, the company says. Considering the result as a whole, sales in Latin America grew 20.6% last year. The company does not reveal the figures for Brazil.

“In the medium and long term, we are extremely confident in the future of our division, both globally and Brazil. The market has a lot of potentials to develop. Brazilian women are looking for more transparency, performance, and sustainability. And, as in the rest of the world, the digital [channel] has accelerated the knowledge of consumers,” said the executive, in an interview with Valor. L’Oréal has less than 10% of the local market share, but the country is the fourth-largest beauty market in the world.

The executive says that L’Oréal’s main objective is to “develop markets”. A current example are the serums — cosmetics for the face that have a light texture and fast absorption. There is still a low percentage of Brazilian women who use this kind of product, says the executive. “Our work in our division is to spread the serum. Explain why to use it and how to use it. This develops the market because it is an additional gesture. And when we develop the market, it grows, and we want to gain market share.”

The current environment increases the complexity of the business. Inflation, a legacy of the large injection of liquidity by governments in Covid’s peak, is new in many countries where the multinational operates. There is not yet a long history to analyze the consumption behavior in those places, but Mr. Valat says that in the beauty market people are inclined to pay a little more as long as the offer is better. In Brazil, although the subject is not new, inflation is currently eroding the income of the local population.

In the mass market, the final prices are fixed by the retailers. However, the multinational has tools to trace price scenarios because of customers’ behavior. The goal is that the values suggested to retailers can be absorbed by the consumer public.

According to Mr. Valat, the beauty company has dealt very well with the issue of global supply chain problems, but this issue requires more effort than before the pandemic began. “We spend a lot of time on this. The situation is complicated, but it is evolving every day. I hope the scenario will get better, but it is challenging,” he says.

Current efforts involve more intense monitoring of raw materials and greater flexibility of the company in the search for supply alternatives and diversification of supply sources. The goal is to reduce dependence on just one part of the world.

Another focus of increasing attention worldwide is ESG practices. Diversity, gender equity and inclusion, and causes such as tackling sexual harassment on the street are among the company’s focal points. And L’Oréal aims to be an industry leader on issues related to sustainability. There are, for example, initiatives to reduce water use in factories.

In addition, alongside companies like Unilever and Natura, the company is developing an industry-wide environmental impact assessment and a sustainable scoring system for cosmetic products. “Consumer demand for more sustainable products is growing. Younger generations are leading this movement. We see concerns about impacts in Brazil as well.”

Source: Valor International

https://valorinternational.globo.com/
/by

Amazon can be recovered, generate income, experts say

They suggest the use of agroforestry occupation to generate economic activity in degraded areas

06/06/2022

Beto Verissimo and Juliano Assunção — Foto: Leo Pinheiro/Valor

Beto Verissimo and Juliano Assunção — Foto: Leo Pinheiro/Valor

The historical process of occupation of the Amazon has created enormous forest loss, but the stock of deforested areas can be recovered and used for the production of items that generate development and income, agronomist Beto Veríssimo and economist Juliano Assunção say. They are the coordinators of the Amazônia 2030 project, which seeks to make a diagnosis of the region’s problems and point out solutions, encouraging the formulation of state policies for the Amazon.

In a live-streamed interview with Valor on Friday, Mr. Veríssimo said that over the last 40 years 83 million hectares have been deforested in the region, which is equivalent to the area of Minas Gerais and São Paulo states. Of this total, only 10% is used in agronomic terms, mainly soybeans. Another 60% are underused areas, generally with low productivity cattle raising, while 30% are abandoned spots.

“There is a myth that it is necessary to deforest to develop. The analyses are absolutely conclusive that it is not necessary. Too much has already been deforested,” added Mr. Veríssimo, who is also a senior researcher and cofounder of the Institute for Man and the Environment of the Amazon (Imazon). “So there’s a long job of making good use of the areas that have already been opened up.”

Mr. Assunção said there is no need to cut down the forest to increase agriculture. “If you look at FAO [Food and Agriculture Organization of the United Nations] data, food production since the early 1960s has been growing at a very constant rate. But if we look at what is happening in terms of area, in the last 20 years, it hasn’t increased,” said the associate professor at the Catholic University of Rio de Janeiro (PUC-Rio) and executive director of the Climate Policy Initiative (CPI) Brazil.

He explained that the Amazon territory was allegedly occupied to “integrate” the country, which made sense in the past, but the goal was not to extract value from the forest. “If this brought us a deforestation of 20% of the Amazon, which is something dramatic from the environmental point of view, today we have in our hands, when we look ahead, a stock of area that no country has to expand its agricultural production,” he said.

Mr. Veríssimo affirmed that reforestation can be used to promote the paper and pulp industry: “The expansion of this sector has to take place in the Amazon, but not over the forest. The specialist points out the important role of agroforestry systems, which combine the preservation of the standing forest and the cultivation of species to generate income, such as cocoa and açaí.

According to Mr. Assunção, the sector of products compatible with the Amazon ecosystem has more than 60 quality items for export, but they account for only 0.17% of the world market share. The Brazilian Amazon represents one-third of the world’s tropical forests.

Both specialists also emphasized that it is necessary to have a land title regularization policy for the region, provided it does not promote flexibility for the illegal advance on preserved areas, which, according to them, has been happening in recent years.

Mr. Veríssimo said that the Amazon is experiencing “a perfect storm of problems”, which include, deforestation, youth unemployment, poverty, and violence. While the region covers 59% of the country, it produces only 8% of the GDP.

For Mr. Assunção, there is a “paradox” in the region, which, with a population of 28 million people, is going through a demographic moment that is expected to be favorable. “The working-age population is growing in comparison with the population of dependents, a process that is likely to come to an end around 2030,” he said.

However, those people have few opportunities. “The labor market is very fragile, mostly with informal labor contracts, and the private sector has difficulty in dynamically establishing itself,” he said. Among young people between the ages of 18 and 25, 42% are outside the labor market.

Source: Valor International

https://valorinternational.globo.com/
/by

Unipar to invest R$130m in new plant in Bahia

New plant with capacity to produce 10,000 tonnes of chlorine a year will be built at the Petrochemical Complex of Camaçari

06/06/2022

Mauricio Russomanno — Foto: Silvia Zamboni/Valor

Mauricio Russomanno — Foto: Silvia Zamboni/Valor

Unipar, the largest producer of chlorine and caustic soda and one of the main PVC manufacturers in South America, will invest R$130 million in a new plant, in Bahia. This raises to R$230 million the disbursements unveiled since the end of last year by the company to expand capacity.

The new plant, with a capacity to produce 10,000 tonnes of chlorine a year, will be built at the Petrochemical Complex of Camaçari (Bahia) and is expected to start operating in the first half of 2024. It will meet the growing demand for hydrochloric acid, sodium hypochlorite and caustic soda driven by the new basic sanitation legal framework.

“We believe in the sanitation framework as one growth driver for the market. There have already been several approvals [of projects] and auctions, and there will be more,” CEO Mauricio Russomanno told Valor.

In chlorine, the company’s installed capacity will jump to 715,000 from 680,000 tonnes/year with two expansions – in Santo André (Greater São Paulo), with an investment of R$100 million, the production of chlorine, caustic soda and hydrochloric acid will be increased by 15% as from the second half of 2023.

With the new injections, the company starts to shape a new growth cycle supported by the perspective of increasing demand for chlorine and its products driven by the new legal framework for basic sanitation in Brazil. The plant in Bahia is the first greenfield project within the company’s geographic expansion strategy, whose last major leap was taken at the end of 2016, with the purchase of the PVC plants of the Solvay group (Indupa) in Brazil and Argentina.

The company had already signaled the intention to have a plant in the Northeast region, in the wake of the high investments necessary for the region to reach the levels of universal access to water and sewage services by 2033 foreseen in the framework.

Bahia is the first step in the region, Mr. Russomanno said. “We are looking at Pernambuco and the north of the region, at states such as Rio Grande do Norte and Maranhão,” he said.

The construction of new plants and potential acquisitions, possibly branching into adjacent businesses, are on the company’s radar.

As Valor reported, Unipar studied the purchase of the chloralkali plant of Compass Minerals in Igarassu, Pernambuco, formerly Produquímica, in the first half of last year, but the deal fell apart. Compass Minerals ended up selling the plant, in addition to the chemical units for water treatment in Marechal Deodoro (Alagoas) and Suzano (São Paulo), to Cape Participações for R$236 million. These units will be operated by Chlorum Solutions.

According to Mr. Russomanno, Unipar may seek financing to execute the project in Bahia, but it has enough funds on hand to build the new plant. At the end of March, the company had more cash and cash equivalents than gross debt, with a positive balance (net cash) of R$432.9 million.

Source: Valor International

https://valorinternational.globo.com/
/by

Sinqia has R$200m for growth plans

Strategy now is to invest in front office solutions

06/06/2022

Even after spending R$420 million on the purchase of NewCon in December and R$79.5 million on Lote45 in January, Sinqia continues to seek new acquisition opportunities to expand the range of software services it offers to financial firms. The focus now, however, is on repositioning the business toward front-office solutions, directly linked to the user interface.

“We want to move out of the kitchen and go to the restaurant window,” said Luciano Camargo, co-founder of Sinqia, who will step down as chief operating officer and take over as chairman. “We will focus more on services such as onboarding, digital signature and digital billing, which are directly related to the financial firm’s relationship with the customer.”

According to the company’s executives, there is still R$200 million in cash for new acquisitions, which will probably be made in the second half of the year. The first half, according to CEO Bernardo Gomes, was the moment to consolidate recent acquisitions, integrating new operations and focusing on increasing revenues.

“This first semester was very much about digesting the acquisitions we made, about understanding how the market looks. We have cash to make another round [of acquisitions] in the second half and continue at this pace. If the moment calls for it, we may also consider making an acquisition in the future,” he added.

Mr. Camargo points out that Sinqia is currently in talks with 200 companies that may potentially be bought. “When we see market trends, we speed up or slow down the conversation with this or that company. It is not a guarantee that it will always work, but it has worked so far.”

To make this strategic repositioning towards front office, the company hired Ricardo Pacheco, a former executive at Itaú, who intends to bring the experience of those who were on the other side of the counter to help Sinqia understand the main needs of banks in a much more competitive environment and in which offering a good digital experience has become a basic necessity for the sustainability of the business.

“We are still scratching the surface, taking advantage of opportunities within the verticals we already work in. The next step is to integrate those solutions. Now it is about generating more value than each company separately,” he said.

Sinqia currently has four main verticals of service: banking, consórcio (buyer’s club), funds and pension plans. Some of its best-known solutions are related to enabling operations, automation of operational processes, accounting controls and interconnection with settlement institutions.

Mr. Gomes comments that there are three main reasons that lead them to make an acquisition. The first is to enter segments in which Sinqia does not yet operate. The second is to gain market share in segments in which it already operates. And the third is to seek companies that offer solutions capable of “horizontalizing” the business that the company already has, integrating the different existing solutions.

“If I take the pipeline of companies we are in contact with, 30% are new segments, 30% mean gaining market share in the segments we already have, and 40% are horizontal opportunities,” he said, revealing that the next acquisition has greater chances of being in this third group.

Besides the integration of solutions, one concern of the executives is to keep their attention focused on fashionable technologies to avoid being left behind in the future. Mr. Pacheco, for example, says he has experience with technologies such as artificial intelligence and blockchain, which are on Sinqia’s radar to expand its portfolio of solutions. In the case of artificial intelligence, the first move in that direction was made by buying Simply in March 2021.

“It does facial recognition and onboarding to ensure that people signing up are who they say they are, keeping all profile data so to reduce risk of fraud. All of this today is already done with artificial intelligence. I hope that in the future we can help the client not only with a report about what has already happened, but also about what is going to happen,” he said.

Regarding blockchain, on the other hand, the company does not have specific advanced initiatives yet, but the executives emphasize that they are monitoring startups working with the technology to prospect opportunities. Sinqia has a Corporate Venture Capital (CVC) program called Torq, in which it looks for startups with business models that complement its products to invest in.

In the first quarter, Sinqia reported net revenue of R$138.9 million, up 103.5% year over year. It was a record number for the company, which means R$555.4 million in annualized values. The adjusted EBITDA advanced 191.7% to R$36.2 million. Net income was R$9.7 million, a 12.4 times expansion in the annual comparison.

Mr. Gomes recalled that in 2013 the company, formerly called Senior Solution, held an IPO with revenues of R$40 million, which seemed very low for a company that wanted to be traded on B3. “Today we have almost R$600 million in annualized revenue with EBITDA of R$144.9 million,” he said.

For the next two years, the cofounder and CEO predicts that the company could double in size. “What we are talking about is to be capable of doubling again in two years in terms of revenue, just as we did in the past, when we increased threefold our size from 2019 to 2021.” Mr. Camargo believes that the 10% market share that Sinqia has today guarantees a “giant” potential for expansion from now on.

Sinqia’s average compound annual growth since 2015 has been around 30% per year.

Source: Valor International

https://valorinternational.globo.com/
/by

ArcelorMittal expands capacity to serve automotive market, industry

Investment in Brazil totals R$7.8bn after new injection

06/02/2022

ArcelorMittal’s Sabará unit — Foto: Divulgação/ArcelorMittal/Nitro Histórias Visuais

ArcelorMittal’s Sabará unit — Foto: Divulgação/ArcelorMittal/Nitro Histórias Visuais

ArcelorMittal, the steelmaker focused on the automotive and industrial sectors, will expand investments in Brazil by R$144 million, totaling R$7.8 billion. The company has been unveiling new capital injections since early last year.

The new investment unveiled Tuesday will target a production unit in Sabará, in the metropolitan region of Belo Horizonte. This plant started operating in 1917, giving rise to Companhia Siderúrgica Belgo-Mineira. The unit was acquired in the 1990s by the then Arcelor.

According to ArcelorMittal’s statement on Wednesday, the R$144 million investment is aimed at increasing the plant’s production capacity by 35%. The company seeks to offer “high value-added solutions for the automotive and industrial sectors.”

The funds will be used mainly for the acquisition of two new pieces of automated equipment for wire drawing. The company targets the market segment of springs, shock absorbers, screws, fasteners and other industrial products.

“The investment strengthens our position in the Brazilian market and increases the company’s competitiveness in the automotive and industrial sectors. Nine of the 10 best-selling vehicles in Brazil use steel produced at the Sabará unit,” said Jefferson De Paula, CEO of ArcelorMittal Brasil and Aços Longos e Mineração LATAM.

The new products, in the case of the automotive sector, will be used both for entry-level cars and SUVs, the company said.

Mr. De Paula stressed that the increase in the mix of products and solutions will follow the growth of the automotive, tooling and railroad markets, expanding the company’s businesses in this market. Production will be primarily geared to the domestic market. The investment is expected to be concluded by 2024.

The Brazilian subsidiary says that, with the new investment, capital injections in Brazil total R$7.8 billion. Of this total, R$4.5 billion are earmarked to expand Minas Gerais operations.

In Santa Catarina, the company will inject funds to expand the cold and galvanized steel rolling mill. The company is also investing to modernize and improve its portfolio and capacity in the steelmaker in Barra Mansa, Rio de Janeiro.

ArcelorMittal is the largest steel producer in Brazil and makes long and flat steel. Next comes Gerdau, its biggest competitor in long steel for construction and industry. Other competitors are Mexico’s Simec, AVB and Sinobrás (in long steel), Usiminas and CSN (in flat-rolled steel) and Ternium and CSP (in the slab market).

Source: https://valorinternational.globo.com/

/by

Petrobras hires Bradesco BBI to sell fertilizer plant

State-owned oil company highlights recently launched National Fertilizer Plan, growth of agricultural sector as attractions

06/02/2022

Petrobras's fertilizer plant in Três Lagoas — Foto: Divulgação

Petrobras’s fertilizer plant in Três Lagoas — Foto: Divulgação

Petrobras hired Bradesco BBI as the exclusive financial advisor to sell nitrogen fertilizer unit UFN-3, in Três Lagoas, Mato Grosso do Sul.

In February, the then-minister of Agriculture, Tereza Cristina, announced the sale of the plant to the Russian group Acron for an undisclosed amount. But the deal was canceled due to a lack of governmental approvals, as informed by Petrobras in April.

Among the terms of the deal disclosed Tuesday by Petrobras is the “mandatory and non-negotiable” commitment that the UFN-3 construction works be completed by the buyer.

The document highlights the recently launched National Fertilizer Plan and the growth of the agricultural sector as attractions for the unit. The plant has a projected capacity of 3,600 tonnes of urea and 2,200 tonnes of ammonia a day, with a consumption of 2.2 million cubic meters/day of natural gas.

“The urea production capacity would represent nearly 20% of Brazil’s apparent consumption of urea in 2020,” Petrobras said. Last week, Mato Grosso do Sul Governor Reinaldo Azambuja told TV show Globo Rural that three companies are interested in buying the fertilizer plant, without revealing names. One is said to be Unigel, which already operates in the Northeast region.

Petrobras will also offer a contract to supply natural gas for fertilizer production at the plant as part of the deal, but the item will be optional. UFN-3 is located near the Gasbol gas pipeline, with an interconnection of nearly 4 kilometers already completed.

Petrobras seeks a buyer with equity greater than $300 million or net revenues equal to or greater than $750 million. If it is a financial player, the interested buyer must have assets under management above $300 million. A joint offer may also be accepted, in the form of a consortium of interested buyers.

The construction works began in September 2011 but were halted in December 2014. Construction is 81% complete.

Source: https://valorinternational.globo.com/

/by