Investment in retail to stabilize, analysts point out

Varejo pós-pandemia: 80% das compras serão feitas em lojas físicas - Mercado&Consumo

The investment scenario for retail this year is likely to remain stable in the face of a possible new slowdown in brick-and-mortar commerce, balanced by the development of ecommerce, say analysts with investment banks and rating agencies consulted by Valor.

Market sources point out that the opening of new stores is related to heated consumption and a fast return on investments, which weighs against short-term expansion movements.

The retail analyst at Banco do Brasil Georgia Jorge says that the explosion of cases of the H3N2 virus and the omicron variant of the coronavirus have led to a deterioration in expectations. “Companies focused on physical commerce will probably remain under more pressure as long as those uncertainties persist,” she says.

According to the analyst, the outlook for the first quarter of 2022 is for “still pressured” sales overall, while pharmaceutical retailers may raise their forecasts amid the influenza and Covid-19 epidemics.

S&P analyst Diogo Ocampo reminds that sales in brick-and-mortar stores in early 2021 were heavily affected due to the pandemic. According to him, demand was not fully shifted to the online operation, which resulted in a drop in sales.

“It was a very difficult year, with falling Ebitda and demand moving to the online channel. All these companies have online channels, but they have lost revenue in this scenario,” he says.

Mr. Ocampo says that the consumption retreat impacted the cash generation of the companies, triggering warnings in relation to the level of indebtedness.

According to Fitch’s CFO Ricardo Carvalho, the macroeconomic uncertainties also impact the level of retail investments because of the dependence on shorter terms of return. The expected, according to the analyst, is that the opening of new stores will slow down in the coming months.

“There is an expectation of lower demand and retailers have to look at what will happen in 2022. They can’t make plans looking at two or three years. If demand doesn’t come, it will be a period of losses. So it’s an investment decision different from than sanitation or railroads,” he says.

Itaú BBA, however, points out that the brick and mortar stores also act as logistical support for ecommerce, which is likely to mitigate the overall more difficult scenario. Retail analyst Helena Villares warns that this does not mean that companies should not revise their estimates downward.

“We already knew it would be a more uncertain macro scenario, with a natural slowdown for retail as a whole. Physical stores are suffering, but there is also the role of ecommerce, to bring inventory together and reduce costs,” she says.

The scenario for more essential segments, such as food, also presents difficulties linked to the macro environment. Fitch says that the performance of companies once boosted during the pandemic has been affected by unemployment and inflation.

“The purchasing power of families today is much lower than it was six months ago. There is a higher level of uncertainty and a weakening trend,” says Mr. Carvalho.

This is also the view of Banco do Brasil, which highlights the resilience of the cash-and-carry due to the lower prices policy.

“Even though food retail has a more essential profile — which does give it some degree of protection — the fact is that food inflation has been weighing heavily on the pockets of Brazilian consumers, reducing their consumption to basic and effectively essential items in the food basket,” says analyst Georgia Jorge.

Considering the lower elasticity of the food market, Itaú BBA highlights that the segment is one of the preferences.

“Retail is likely to suffer —¬ at least in the first half of the year — but the decline in food retail is approaching a limit,” says Ms. Villares.

Another factor expected to continue to weigh against retail securities, according to Itaú BBA, is the movement of investment funds away from the sector.

The analyst says that, due to the high interest rate and the weak performance of Ibovespa, many fund managers have preferred to increase the composition of other sectors in their portfolios.

“In the past, exposure to retail used to be 15% to 25%, but many funds can reach 5% exposure because of this portfolio adjustment,” she explains.

Source: Valor international

https://valorinternational.globo.com/

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Renewable power companies become acquisition targets

Hybrid renewable power plants make a good business case but need clearer legislation to become more widespread | WindEurope

At least four renewable power companies are for sale in Brazil, attracting the interest of groups and asset management companies, including from overseas. The two main assets — Ibitu and Rio Energy — are valued at R$12 billion, according to sources. Other businesses on the block are Renova Energia, which divested projects in 2021 and may sell others in the judicial recovery plan, and EDP Renováveis, with an open strategy of asset rotation.

With the increased global demand for clean energy, renewable companies in Brazil have become the target of interest from international investors. A survey by Itaú BBA, conducted at Valor’s request, shows that 22 deals were closed in the sector last year, with a business value of R$16 billion. For this year, the estimate is to reach R$20 billion.

Part of the recent investments made in the sector came from private equity funds (which buy stakes in companies) that now want to get out of the business. “Project development groups sell assets to recycle capital to invest in other projects,” said Gustavo Miranda, head of investment banking at Santander.

Put up for sale in the middle of last year, Ibitu, controlled by the American asset manager Castlelake, has wind and hydroelectric assets in Ceará, Rio Grande do Norte, Piauí, Santa Catarina, Mato Grosso and Minas Gerais — with more than 877 megawatts (MW) of installed capacity.

The renewable power company originated from the assets of Queiroz Galvão Energia, when the group went into financial crisis amid the now questioned anti-corruption task force Car Wash and put subsidiaries under judicial reorganization. The American private equity fund Castlelake bought the power subsidiary’s debt and took over the business.

With multibillion expansion plans for the business, Castlelake began to be harassed by funds and hired BTG Pactual and Credit Suisse to find an interested party for its assets, valued between $900 million and $1 billion.

Another target is Rio Energy. After giving up on making an IPO last year, the company controlled by U.S.-based private equity firm Denham Capital hired Bank of America (BofA) and Itaú BBA to sell its business, sources familiar with the matter say.

Rio Energy has three operational wind farms totaling nearly 485 MW in installed capacity in Bahia and Ceará, besides two wind farms in Bahia and one in Ceará expected to start in 2022. This is not the first time the company has negotiated the sale of its business. After dropping out of the IPO, the company is once again looking for a buyer. The assets are valued at around R$6 billion.

Another company that may sell assets in 2022 is Renova Energia. In judicial reorganization since 2020, the company sold Brasil PCH for R$1.1 billion and its stake in the Serra da Prata Hydroelectric Complex to settle part of its debt in the market. The power generating company still has a debt of around R$2 billion and is expected to continue divesting assets.

The Alto Sertão III wind farm, in Bahia, will remain with the company. However, the company still has 16 projects in development with leasing contracts, and 12 of these areas already have a previous environmental permit for the development of wind farms, which makes these areas eligible. The areas are located in Bahia, Paraíba, Pernambuco and Piauí, and have a generation potential of around 3.62 GW. The company is studying which one will be sold.

One of the main countries drawing investments in this segment, Brazil is on the radar of investors, since it has natural resources, lower costs and stable regulation. Furthermore, excluding the Unite States and Europe, funds from around the world do not find large platforms for investments in this sector.

“Brazil combines a large market and regulatory stability for renewable power generation,” said Alexandre Viana, a partner and head of consulting at Thymos. A practical example of this is that Brazil is once again on EDP’s radar. Last year, EDP Brasil acquired 100% of AES Inova and made partnerships in the viability of large-scale solar plants. CEO João Marques da Cruz often says that the company’s strategy involves the sale of operational assets to finance new investments.

The generation arm, EDP Renováveis, has Brazil in its 2021-2025 horizon. With global installed capacity of more than 12.6 GW, the goal is to reach 20 GW of capacity by 2025. The devaluation of the Brazilian currency is another point that made the assets cheaper and may draw the attention of international players. The already weakened real can fall even more and some analysts say the foreign exchange rate may reach R$6 to the dollar this quarter. The company put up for sale a hydroelectric plant in Espírito Santo and two others in Amapá. Pipeline, Valor’s business website, first reported last year that the assets of EDP, Ibitu and Rio Energy were put up for sale.

Consultants heard by Valor believe that wind and solar will remain as leaders of this business in 2022, because these sources are the pillar of growth in terms of profitability, scale and consolidated industry.

In addition, the ESG agenda linked to these sources and the learning curve that has cheapened the price of megawatt-hours has drawn the attention of players who want to diversify their operations, from companies seeking long-term risk management to oil companies.

The privatization drive has not progressed as the government says it wanted, but the Brazilian Development Bank (BNDES) announced that the stock offering of the state-owned company will be launched in mid-March. After that, the federal government will no longer hold 72.33% of the voting capital and will be diluted in the total capital of the company. The expectation is that the government’s stake will fall to 45% and that it will no longer be the majority shareholder in the power company. That situation would likely draw investors, from individuals to corporations.

Mr. Viana, with Thymos, added that the opening of the free energy market, a segment in which companies with high energy demand can negotiate directly with generation companies and traders, will probably drive mergers and acquisitions in Brazil. The BNDES and the Banco do Nordeste (BNB), major players that finance expansion projects in the electricity sector, want to develop projects in the free market and in renewable power.

Other operations have been going on since 2021 and are likely to materialize this year. One is the merger between the energy assets of Votorantim Energia and the Canadian pension fund CPPI, which is expected to create one of the largest energy groups, Nova VTRM, valued at R$15 billion and owner of a number of renewable generation assets and control of Cesp. The company received an investment of R$1.5 billion from CPPI for expansion that can be done in greenfield and acquisitions.

Denham Capital, EDP Renováveis, Ibitu, Renova and Rio Energy declined to comment. Castlelake did not immediately reply to a request for comment.

Source: Valor international

https://valorinternational.globo.com/

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Companies unite for racial justice agenda

CEOs and senior executives of 47 companies from various segments have united with the goal of training 3 million afro-descendant professionals for the Brazilian market and taking 10,000 of them to leadership positions by 2030. The Movement for Racial Equity (Mover) started to be formed in 2020 and has the goal to accelerate racial inclusion and also fight structural racism within companies as well.

This year, the group is going to start investing R$15 million in training and employment public notices. Among the participating companies are giants such as Mondelez, Coca-Cola, Gerdau, BRF, Ambev, Carrefour, UnitedHealth, Via, XP and Heineken.

Liel Miranda, CEO of Mondelez in Brazil and also Mover’s president, believes it is possible to obtain the desired results because the movement has clear goals, a strategic plan set up with the support of organizations and institutions that fight for racial equality, and an annual budget of R$15 million, considering initially a three-year investment cycle.

The amount was raised among the members, which, in addition to signing a commitment to work for racial inclusion inside and outside their companies, also need to contribute with a minority (R$250,000) or majority (R$500,000) quota, says Mover´s CFO Marina Peixoto. In 2022, part of this budget will begin to be allocated in public notices for training and employment, aimed at black people and organizations, with the support of the Baobá Fund.

Among the 47 CEOs Ms. Peixoto is talking to in pursuit of achieving Mover’s goals, three declare themselves black or mixed race: Edvaldo Vieira, CEO of Amil – UnitedHealth Group, Mauricio Barros, CEO of DHL, and Eduardo Santos, 34-year-old executive leading the Brazilian operation of the Swiss language school EF Education First, owner of the English Live platform.

Last year, Mr. Santos learned about Mover through Liel Miranda, who called him: “Edu, for us to develop 10,000 professionals for leadership positions, having English is fundamental”. Mr. Santos joined the group and says that he is now studying how the courses offered by his company can be included in the training in which Mover will invest.

In the strategic agenda outlined by Ms. Peixoto with Mr. Miranda, Mr. Santos and the other CEOs, although 80% of the budget is allocated to public notices and training organizations, it is defined that member companies need to do their homework with their own resources.

“It’s no use creating a multi-million fund for the community, if at home these companies do not have representation and consistency in racial equality policies,” says Ms. Peixoto. One of the first challenges that Mover faced during its structuring in 2021, says the executive, was finding that a large part of the members did not have a finalized demographic census — which prevented the group from obtaining an accurate picture of how many black people it had in its total workforce and in which positions there were gaps in representation.

“Companies are at very different stages of maturity, in terms of racial issues. We made it a priority for them to carry out this census now in 2022 and we set the goals based on preliminary data, the members’ turnover numbers and the Ethos Institute survey,” she says. Although the country’s population is made up of 56% of black people, they make up only 35% of the workforce in companies, according to the latest survey by Ethos.

Associates also committed to creating more inclusive recruitment, and in 2021 participated in events targeted at black talents, where they made available a total of 800 jobs — from trainees and up, mostly in management positions. Creating a more inclusive selection and environment also depends on awareness and companies will intensify racial literacy, says Ms. Peixoto. Last year, 200 Mover volunteers were trained by the Instituto Identidades do Brasil (ID_BR).

Liel Miranda, with Mondelez, also defends that this agenda should not only belong to CEOs and that it needs to include the entire workforce. He cites a live transmission promoted by Mover in November, about racial literacy, and aimed at more than one million employees.

At home, Mr. Miranda says that Mondelez redirected its internship program and filled 80% of its positions with black and mixed race people. “But we need to go even further, not stop at entry positions. Therefore, we have the goal of having 34% of black and mixed race people in administrative and leadership positions by 2024.” Currently, Mondelez has approximately 37% black employees, with 24% of them in administrative positions.

Source: Valor international

https://valorinternational.globo.com/

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Analysis: XP’s acquisition of Modal can be a masterstroke

Em troca de ações, XP compra 100% do Banco Modal por R$ 3 bilhões

The acquisition of Banco Modal by XP Inc. brings to the financial group founded by Guilherme Benchimol R$30.4 billion in assets under custody, 501,400 active clients and a portfolio line of credit of R$606.8 million, data from the third-quarter results show. It may seem little for XP, which was already near R$800 billion under its umbrella, with 3.3 million active clients and R$8.6 billion in collateralized credit operations. But far from being a negligible step in the consolidation of the investment market in Brazil, XP’s bid can be considered a masterstroke.

With the countless agreements closed by Modal, such as the sale of up to 35% of its capital to Credit Suisse in mid-2020, the digital bank was one competitor with the potential to cause problems to XP. In the premium segment, which serves customers with at least R$300,000 in assets, Modal had been offering asset allocation with the Credit Suisse brand. Modal’s mobile application made available 28 exclusive funds from the Swiss group’s private banking in Brazil and the plan was to reach 40 in the first quarter of 2022.

In a meeting with investors in mid-December, Modal CEO Cristiano Ayres said that more than just a pretty name, the presence of Credit Suisse was the way to offer financial advice similar to what is done with large fortunes. The relationship with the Swiss group also paved the way for Modal to take part in the syndicate of banks in capital market operations and distribute assets originated by the firm to its retail base.

The foreign partner’s seal of approval also helps draw independent and professional brokerage firms to the platform, Mr. Ayres said. Modal had been moving forward in this distribution channel since the acquisition of the research company Eleven, which already had relationships with several asset management firms, including competitors.

Another front in which Modal had been investing was in the so-called “B2B2C,” in which it offered financial services to various partners. It already had agreements with companies such as Rappi, Dotz and Conta Black.

Acquisitions made by Modal to create an “ecosystem of financial well-being” are also in line with the businesses where XP demarcated its territory, including financial education and training of professionals, whether in investments or technology.

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Prudential evaluates opportunities in new Latin American companies

A Prudential

The American insurance company Prudential has its eye on new companies in Latin America and Brazil. Through PruVen Capital, a venture capital asset manager created in late 2020, it has been evaluating businesses linked to innovation in the areas of insurance, asset management, healthcare, financial services, and technology.

With expected investments between $5 million and $10 million, PruVen is currently analyzing three startups in the region. The targets are operations able to catalyze changes within the group itself and that are “more or less consolidated for series A investments,” says Erick Kluft, head of strategy and risk at Prudential Financial in Brazil.

“We look for companies that, besides financial return, have some synergy with the group, that can contribute to growth, whether in products, distribution, new methods or operational control processes,” says Mr. Kluft. The idea is to have no more than a 30% stake in businesses that have already been tested in some way and have the potential to become “iconic”.

Prudential started to target businesses complementary to its core activity, with the intention to orbit in the world of innovation, in 2019, when the group’s leadership changed. It attracted as a founding partner to PruVen Ramneek Gupta, one of Robinhood’s angel investors, and who was for nearly a decade head of venture capital investments at Citi globally.

“We are very focused on services for small and medium-sized enterprises, especially insurance brokers. We believe that with more than 8 million such firms, growing at a rate of 660,000 new companies per year, there is a powerful opportunity to help those companies grow and manage their business with technology and tools typically available today only to the big guys,” says Mr. Gupta. “Couple that with the highly complex regulatory environment that small businesses face in Brazil and you have the ingredients for a substantial market opportunity.”

Mr. Kluft says that by the very nature of Prudential Financial’s business, the high interest rates in Brazil is unlikely to hinder investments in startups with proprietary capital. “The company has existed for almost 150 years,” he says. “It doesn’t think in the short term. Our work is to deal with life. I take care of my client from the first moment, when he needs a life insurance, until when he passes away, I’m there to close the cycle with his family.”

In Brazil, Prudential has been in business for more than two decades and is one of the leaders in the life insurance ranking. The group is present in over 40 countries and has $1.7 trillion in assets under management and over $4 trillion in capital insured.

Source: Valor international

https://valorinternational.globo.com/

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Commodities dominate exports even in São Paulo

Commodities: o que é e como funciona?

Commodities are grabbing an increasing share of exports across nationwide. In all regions, products related to agribusiness or the extractive industries ended the year dominating foreign sales. Soybeans have become the champion of shipments in ten states, crude oil or oil products are in the lead in three federative units and iron ore is now the main product exported in three others.

According to data from the Secretariat of Foreign Trade (Secex), the share of the manufacturing industry in Brazilian exports shrank to 51.3% in 2021 from 63% in 2010. This category also covers agribusiness products that undergo some type of industrial processing, such as meat, pulp and refined sugar.

Even São Paulo, Brazil’s most industrialized state, has its export basket led by commodities. Sugar ($5.6 billion last year) and crude oil ($4.3 billion) — whose production has soared in recent years because of the pre-salt layer — are the two goods most sold abroad. Embraer aircraft, the first purely industry item, came in third and contributed $2.3 billion.

In Paraná, passenger vehicle — which come at the front among manufactured goods outside agribusiness or extractive industry — are only the eighth most exported product. Also in eighth are shoes in the state of Rio Grande do Sul. Both states had soybeans as a prominent product in 2021.

For economist Paulo Gala, professor at the School of Economics at Fundação Getulio Vargas, the fact that the Brazilian map is now dominated by commodities allows for two thoughts. First: no state manages to have a sufficiently sophisticated exports agenda to have highly technological products — instead of grains, oil or minerals — as sales champions. Second: the Brazilian industry is predominantly focused on the domestic market and still lacks greater global competitiveness.

In his view, only a few micro-regions of the country — around cities like Campinas, Piracicaba (both in São Paulo), Caxias do Sul (Rio Grande do Sul) and Betim (Minas Gerais) — managed to transform themselves into “islands” of innovation and productivity, with leading industries. No wonder, he adds, they are among the municipalities with the highest per capita income.

“Only a few hubs have sophisticated export-oriented industries driving the local economy, but these hubs don’t come to dominate a entire state,” Mr. Gala said. “What brings jobs, income and reduced inequality is the production of complex goods. They require research and development, technology, patents. Embraer, WEG and Marcopolo are counterexamples of our incapacity for commercial insertion in the world,” he said.

According to the professor, not even the weakened real since the beginning of 2020 has been enough to avoid the loss of space of the industry in exports, compared to agribusiness and mineral extraction. “The weakened real helps price competitiveness, not quality competitiveness. The real exchange rate is at its lowest level in the last 20 years, but we need a much heavier science and technology policy and industrial stimulus,” he said.

The domination of commodities has intensified, said José Augusto de Castro, head of the Brazilian Foreign Trade Association (AEB). He estimates the deficit in manufactured products at $70 billion to $80 billion. On Monday, Secex unveiled a record balance of $61 billion in the balance of trade last year – obviously counting all kinds of products, not only those related to industry.

In his view, Brazil is now excessively dependent on three products (soy, oil and iron ore), which represent around 40% of total shipments, and on a single market (China) that buys 32% of our exports.

“In the 1980s, people complained a lot about the dependence on the United States, but the American market absorbed around 25% of Brazilian exports and there was more product diversification. At that time, eight of the ten main export items were manufactured goods. Now, the top 15 are commodities.”

In descending order, the 15 main products sold by Brazil last year were: iron ore, soybeans, crude oil, refined sugar, beef, soybean meal, fuel oils, chicken meat, pulp, semi-finished products or ingots of iron and steel, coffee, gold, corn, cotton and copper.

Therefore, Mr. Castro links the recent trade balance surpluses to the favorable price environment, not to the support of public policies. “The Brazil cost is still very high and the government has ended Reintegra [a program that reimburses companies for part of the taxes paid along the production chain], in addition to having reduced resources for financing exports, under Proex.”

Source: Valor international

https://valorinternational.globo.com/

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Companies unveil $500bn of investments by 2030

Find Investments To Meet Your Financial Goals – Forbes Advisor

Companies are likely to take a wait-and-see approach regarding investment decision-making this year. But some segments, benefited by structural reforms or boosted by international prices, will put their money to work.

Basic sanitation, logistics, energy, oil and steelmaking are in the front line, according to company executives and business plans unveiled in documents delivered to the capital market regulator.

These companies, mostly large players on the stock exchange, can be a safe haven for a capital market that is coming off a drop in 2021 while international peers have seen all-time highs.

More than $500 billion in investments have been announced until 2030, according to a preliminary survey by consulting firm Deloitte. The highlights are the petrochemical and steel industries, and projects linked to oil and gas. These are investments unveiled for the medium to long term, with the prospect of a larger volume of allocation of funds this year than in 2021.

Petrobras, Brazil’s largest company by revenues, unveiled in November a $68 billion business plan for the 2022-2026 period – up 23% from the previous one – focused on exploration and production of oil and natural gas. In this period, the divestments foreseen by the state-owned company will be between $15 billion and $25 billion, which in theory paves the way for new investments from the companies that will take over these assets. That has been happening in recent years amid Petrobras’s effort to reduce its debt pile.

In the basic sanitation industry, large figures are also expected. Between 2022 and 2026, water utilities Sabesp (São Paulo), Copasa (Minas Gerais), Sanepar (Paraná) – the three largest listed companies in the sector – and Corsan (Rio Grande do Sul), which is expected to go public this year, have unveiled combined investments of R$45.5 billion, up 67% from the amount spent between 2017 and 2021.

That’s almost eight times what they had on hand at the end of September, and compares with combined assets of R$81 billion and net equity of R$43 billion in the same month. The market capitalization of the three public companies totaled R$37 billion at the beginning of this year. Corsan’s stock offering, a privatization on the stock exchange, may raise R$1 billion.

“Corsan will be the first opportunity of this new cycle to enter the sector through the stock exchange. The basic sanitation market has many gains to be extracted, and there is a lack of companies to invest in, so Corsan can be a vehicle for a future expansion across Brazil,” Fábio Abrahão, head of infrastructure, concessions and public–private partnership at the Brazilian Development Bank (BNDES), told Valor last month.

According to the new regulatory framework, from July 2020, the companies will have to provide drinking water to 99% of the population and sewage collection and treatment to 90% by December 31, 2033, which would finally take the country out of its secular backwardness in this sector. Since the approval of the framework, at least R$42.2 billion have been guaranteed by the companies that participated in the auctions organized by the federal government, including that for Rio de Janeiro-based Cedae.

Basic sanitation will be a highlight, credit rating agency S&P Global Ratings said, but it is part of a broader spectrum of the role of infrastructure in attracting investments in the coming years, which goes beyond short-term issues such as elections.

“Infrastructure investors are not short term. Infrastructure is a very deficient field, and taking on this risk is actually taking on Brazil risk,” said Julyana Yokota, an infrastructure analyst at S&P.

Another important road for capital inflow in the communications infrastructure is the fifth-generation mobile network (5G). The auction held in early November will bring R$47.2 billion, according to the National Telecommunications Agency (Anatel), considering fixed concession payments and investments to be made over the term of the contracts.

As expected, Brazil’s largest operators – América Móvil’s Claro, Telefónica and Telecom Italia’s TIM – had a prominent role, but the market will also have new players, which brings more money to the table. Of the 15 bidders, 12 bought frequency blocks, 7 of which are newcomers.

One is Ceará-based Brisanet, which won three lots. A few months earlier, the company went public and raised R$1.25 billion, most of it earmarked for network expansion, according to the prospectus of the IPO.

Mining and steelmaking will continue to have a substantial weight this year – on the stock exchange, trade balance and investments. Vale, Brazil’s largest exporter, set aside $5.8 billion for this year, up 7.4% year-over-year. The mining company’s projection, made in a meeting with analysts in late November, is to maintain capital expenditures around $5 billion to $6 billion per year. The forecast is to reach, by the end of next year, 370 million tonnes of iron ore production capacity, which may recover the levels of demand and price seen in the first half of last year if a Chinese recovery comes after the pandemic comes to an end.

CSN Mineração expects a balanced world iron ore market in 2022, with reduced restrictions on steel production in China and a small increase in supply. The investment planned for this year, about R$5 billion, is 70% higher than that of 2021.

In a meeting with investors in early December, chief financial officer Pedro Oliva said he expects ore to be traded between $100 and $120 a tonne this year. At the peak of what was seen as a new commodities boom at some point, the price was over $200.

In the steel industry, prices are expected to remain at levels much higher than recent years, even with the adjustments already put in place, said Luis Fernando Martinez, executive director at CSN, at the same event. The steelmaker foresees investments of R$4.1 billion this year, up from R$2.8 billion in 2021.

Competitor Gerdau foresees capacity increase investments in Brazil of $500 million starting in 2024. This year, the company will invest $130 million in the North American operations and $140 million in specialty steel.

(André Ramalho, Rafael Rosas and Ana Paula Machado contributed to this story.)

Source: Valor international

https://valorinternational.globo.com/

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Warehouses are in for another heated year

Why multi-story warehouses are coming to America

The warehouse segment is in for another heated year, with multi-billion investments and high demand for leasing. E-commerce companies, retailers and the pharmaceutical industry are in the front line, and there is a search for areas for storage, exchange and distribution of products from in places as diverse as the city of São Paulo – Brazil’s largest market – and states like Minas Gerais, Bahia and Pernambuco.

Warehouse gross absorption, an indicator of new leasing contracts, grew 19% last year in the state of São Paulo, to 2.75 million square meters, data by consultancy CBRE show. Net absorption, which is the difference between leased and vacated areas, expanded 22%, to 1.56 million square meters. The consolidated figures for Brazil have not yet been disclosed, but CBRE expects that gross absorption has exceeded 5 million square meters. Both indicators meant all-time highs. Vacancy fell 1.4 percentage points in 2021, to 12.3%.

The volumes seen in the state of São Paulo and in Brazil are likely to remain flat in 2022, said Fernando Terra, senior director of industrial and logistics for Latin America at CBRE.

On the one hand, a slowdown in e-commerce is not expected, Mr. Terra said. On the other hand, most of the main companies in the segment have contracted a substantial volume of large warehouses in the last two years. “Certainly, the big players will take smaller areas,” he said. At the same time, e-commerce players that arrived recently in Brazil, like Shopee and Alibaba, are likely to pick larger warehouses.

As the vacancy rate of warehouses fell, the next effect of the heated demand will be higher rental prices, said Giancarlo Nicastro, CEO of SiiLA, a consultancy focused on real estate. In view of the high new inventory expected for the Brazilian market, however, there may be some increase in the share of vacant spaces in relation to the total.

“The year starts with scheduled delivery of 3.7 million square meters in Brazil, an all-time high. Even if the total reaches only 2.6 million square meters, the vacancy rate tends to rise a little,” Mr. Nicastro said. The announced figures are usually adjusted later, he said. In 2021, the initial projection of new warehouse stock was 3.38 million square meters, but the real volume was 2.2 million.

There may be some delay in construction works, said Mariana Hanania, head of research and market intelligence in Brazil at Newmark. Part of what is under construction is already leased, she said, so there is no risk of oversupply. “Even as there was an important growth in stock, vacancy is falling,” the executive said. In the state of São Paulo, deliveries of projects have occurred mainly in regions with almost no vacancy, and a relevant part of the new stock results from the expansion of already existing projects, she added.

Amid the heated demand, warehouse developers continue to disburse large amounts to expand their assets. Bresco plans to invest R$1 billion this year as part of a plan to have a portfolio twice as large by 2024. In 2021, its assets totaled R$3.2 billion.

The consortium formed by Credit Suisse, BTG Pactual, Construtora São José and Fram Capital, which will develop a set of warehouses on land that once belonged to Ford in São Bernardo do Campo, São Paulo, estimates to start deliveries in a year’s time and to finish it by 2024. Total investments in the purchase of the land, permits and construction work are estimated at R$1.3 billion.

Although most of the segment’s funds are destined for locations up to 30 kilometers from the city of São Paulo, there has also been the development of projects in other states. “Those who live in Pará or Amazonas also want to receive the product in one day, just like in São Paulo. This results in an avalanche of investments,” said Celina Antunes, CEO at real estate company Cushman & Wakefield.

Log Commercial Properties is the country’s most geographically diversified warehouse company. Considering finished projects and works in progress, it has facilities in 39 cities. The company expects to invest R$900 million this year. “We will have a very active year, with record investments and revenues. We will deliver almost 500,000 square meters of GLA [gross leasable area], most of it with construction already started,” CEO Sergio Fischer said. From the total to be concluded, 70% to 80% is already leased.

There may be an excess supply of warehouses in two years, considering that technological advances for cargo movement may result in the need for fewer square meters, said Nessim Sarfati, founder of Barzel Properties Gestora de Recursos. “But there is still much space for absorption of warehouses.”

Bruno Mendonça, a real estate market analyst at Bradesco BBI, expects more demand than supply of projects. But just like other segments of the real estate market, the one of warehouses has been impacted by the pressure of input costs, according to him.

Walter Cardoso, CEO at consultancy CBRE, believes that purchases and sales in the warehouse market are likely to fall this year after reaching R$8.7 billion in 2021, an all-time high. The potential drop would be driven by higher interest rates and lower fundraising by real estate investment funds. If an entire portfolio of warehouses is traded, however, the 2021 figure may be surpassed, Mr. Cardoso said. The executive also said that, in election years like this one, instability usually prompts a “flight to real estate.”

Source: Valor international

https://valorinternational.globo.com/

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Inspectors’ work-to-rule campaign impacts agricultural exports

The consequences of the work-to-rule campaign of federal agricultural inspectors in the production, export and import of agribusiness products and inputs are beginning to impact players in the sector. Leaders report “concern” about delays in the sanitary certification or customs clearance processes, but the impacts are still unknown.

Cargoes of agricultural products, some destined for China, are stopped at ports. There are already lines of trucks at border depots in Foz do Iguaçu (Paraná) and Dionísio Cerqueira (Santa Catarina) with items imported from Argentina and Chile.

Exporters are pressuring the inspectors and consider the measures as “procrastinating.” A letter from the Brazilian Beef Industry and Exporters Association (Abiec), sent to member companies last week, says that the essence of the auditors’ mobilization “is to create even more encumbrance and stoppages.”

In September, during an operation by the inspectors, Abiec obtained a provisional ruling to force the continuity of “services of inspection of industrialized products and the issuance of health certificates” until the judgment of the writ of mandamus. According to the organization, the decision also supports companies in the work-to-rule campaign. The letter, obtained by Valor, states that Abiec associates should guide any federal agricultural tax auditors “creating difficulties in the fulfillment of its legal obligations” to resume his ordinary activities with base in the court order.

“When pointing out difficulties to the production, the association itself does not realize that the biggest difficulty is its intimidating posture. After all, the inspectors are under no obligation to comply with a court decision received through unofficial means, such as, for example, the statement prepared by the association,” says a letter signed by Janús Pablo, head of Anffa Sindical, the auditors’ union. The union says that the mobilization is not a strike and that it strictly follows the principle of legality. Any “intimidation” of private agents must be reported, according to the text.

“We are worried. While we support the auditors’ right, we need to maintain production and export. I’m sure the auditors will be sensitive to understand the need to avoid delaying production too much,” said Ricardo Santin, president of the Brazilian Animal Protein Association (ABPA).

There are still no official surveys on the impacts of the work-to-rule action. Auditors heard clarify that the intention is not to harm society, but to be able to sensitize the government to improve the category’s working conditions. The Ministry of Agriculture did not immediately reply to a request for comment.

In a meeting at the end of December, professionals affiliated with the Anffa Sindical decided not to strike or stop working. However, they adopted the work-to-rule campaign, in which they comply with the statutory deadlines for the activities and are limited to working eight hours a day, without carrying out extra hours or shifts.

The measure is a way of putting pressure on the federal government for salary adjustments and new public hiring tests to make up for the deficit in civil servants. Agricultural auditors are also studying handing over positions, similar to what other mobilized federal categories want, such as Central Bank and Federal Revenue employees.

Upon returning from the year-end break at the Ministry of Agriculture earlier this week, the employees told their managers that, following the statutory deadlines and fulfilling the eight hours of daily services, from Monday to Friday, the next export certificates would only be issued in five days.

The inspectors continue to act within the law, according to the union, following the deadlines set out in rules and regulations, but the high demand and lack of civil servants hinder the processes. “If meatpackers inspectors limit themselves to working eight hours a day, it will already cause inconvenience. As it is, it would be enough to comply with the procedural deadlines and the working day to cause delays,” another source told Valor.

The union calls for the end of “strenuous workdays, of unpaid overtime, at the end of continuous and exhausting work from Sunday to Sunday.” The category does not know how many overtime hours were worked. The Ministry of Agriculture stopped releasing the balance. Anffa requested it by letter, but got no answers.

Source: Valor international

https://valorinternational.globo.com/

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Braskem gears up to sell shares on B3

The banks participating in the consortium chosen by Braskem to sell the shares of the Brazilian petrochemical company on the stock exchange are working to conclude the secondary offering by the end of January, three sources familiar with the matter say. The idea is to raise between R$9 billion and R$10 billion by selling the company’s preferred stocks (PNs).

The offering on the stock exchange will involve only the PN shares of Novonor (formerly Odebrecht) and Petrobras, the two shareholders that are part of the Brazilian petrochemical company’s controlling shareholders block.

The move is crucial for Novonor to pay a good part of what it owes to the creditor banks. The group’s total debts to them amount to around R$15 billion. The group went into judicial reorganization in June 2019, with debts of nearly R$100 billion.

A source familiar with the creditors is optimistic about raising around R$10 billion, but the consortium is working with a more conservative figure of R$9 billion. Participating in the syndicate of banks to make the operation on the stock exchange are Bradesco, BTG Pactual, Citi, Itaú, JP Morgan, Santander and UBS-BB, under the coordination of Morgan Stanley.

Sources familiar with the matter told Valor that the efforts of the syndicate of banks will be to make the secondary offering in Brazil and abroad — there is an expectation that institutional funds, which are already minority shareholders in the Brazilian group, will take part in the offering.

Braskem’s market capitalization closed at R$ 42.4 billion on Wednesday. The company’s preferred shares closed the day at R$53.77, down 4.8%, but up 160% in one year. Common shares closed at R$52.85, down 3.9% in the day, but up 137% in 12 months, according to Valor Data.

Novonor holds 38.4% of the company’s capital and, Petrobras, 36.15%. The plan is to start with the sale of preferred shares, with 20% of the capital. The expectation is that, after this operation, the petrochemical company will migrate to Novo Mercado, the strictest governance segment of B3.

The plans to sell shares on the stock exchange gained strength after the search for a buyer for the petrochemical company did not result in an attractive proposal. Morgan Stanley, with a mandate from Novonor, was looking for one or more buyers, but the process did not bring the expected result.

At the same time, Petrobras hired J.P. Morgan to advise it on the sale of its stake in Braskem and had already signaled that it was looking for an exit along the lines of what it did with the former BR (now Vibra Energia), with more than one operation on the stock exchange. The Brazilian state-owned company is getting rid of assets that are no longer considered strategic to its business.

Sources connected to Novonor’s creditors told Valor that the sale on the stock exchange is the best alternative, since there was no firm proposal for the purchase of Braskem as a whole, only in slices. The divestment is foreseen in Novonor’s judicial reorganization plan, whose shares in Braskem were given in guarantee to creditor banks — Bradesco, Itaú, Santander and Brazilian Development Bank (BNDES), besides Caixa Econômica Federal.

The largest producer of resins in the Americas, Braskem is likely to end 2021 with historic numbers — the company moved up to December the payment of R$6 billion in dividends for the current year. The Brazilian petrochemical company is on track to achieve all-time high annual net revenue of R$100 billion, almost double that seen in 2019 and 71% higher than in 2020.

Braskem, Novonor and Petrobras declined to comment.

Source: Valor international

https://valorinternational.globo.com/

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