Funds will be used to finance acquisition of regional jets made by the Brazilian company
09/15/2022
Embraer’s production line in São José dos Campos — Foto: Carol Carquejeiro/Valor
Apollo Global Management, one of the world’s largest asset managers, has set aside up to $1.5 billion to finance clients interested in buying Embraer regional jets. The move is likely to strengthen the Brazilian airline’s backlog.
Under the new program, a first definitive sale and leaseback agreement has already been signed for six E195-E2 jets for Porter Airlines, with deliveries scheduled for 2023 and financing under a pre-delivery payment (PDP) program.
Investors received well the news and Embraer shares ended Thursday’s session up 3.6%, at R$13.61, on Exchange B3. In the year, however, the securities are down 45%, erasing part of the nearly 200% rise seen in 2021, the highest of Brazil’s benchmark stock index Ibovespa.
According to Embraer, through the agreement with Apollo funds, tailored financing alternatives will be offered in addition to leasing options. The program also includes options to explore financing for customer projects focused on sustainability.
“Working closely with Embraer, Apollo has created a range of efficient and cost-effective financing options that offer our customers the individual flexible arrangements they need,” said Antônio Carlos Garcia, the Brazilian company’s chief financial officer, in a statement.
The program will be available primarily through Apollo’s aviation business unit, with dedicated investment funds, the PK AirFinance platform and its leasing and services affiliate Merx Aviation.
Gary Rothschild, CEO of Merx and head of aviation of Apollo, said in a statement the timing is “key” for the manager’s plans in the aerospace segment. “Apollo can make a difference at every point in the customer financing journey, from PDPs and bridge facilities to long-term leasing and debt products across the widest range of asset types and ages,” he said.
The Brazilian planemaker has innovated in its customer financing programs, which during the Covid-19 pandemic gained an important reinforcement from the Brazilian Development Bank (BNDES).
In June, the company’s firm order backlog totaled $17.8 billion, the highest since the second quarter of 2018. In the first half of the year, 17 airliners (E175 and E195-E2) and 29 business jets (Phenom 100 and 300, and Praetor 500 and 600) were delivered.
On Thursday, the company also reported that the C-390 Millennium multi-mission aircraft will debut this weekend at NATO Days, Europe’s most important security show. The event takes place in the Czech Republic.
Ecorodovias won the auction of toll roads included in the Noroeste Paulista lot, held on Thursday. The company made a bid of R$1.24 billion in fixed concession to be paid to the government of São Paulo. The minimum price was almost symbolic, at R$7.6 million.
The market reacted very negatively to the news. Shares ended the trading session down 11.97%, at R$5.37.
The auction attracted two other groups. CCR made a bid of R$753.8 million, and asset management company Pátria offered R$321.3 million. Since the difference between the two competing bids and the winner was significant, the competition ended before the open outcry stage.
In addition to a fixed amount to be paid by Ecorodovias, the concession provides for variable fees of 8.5% of gross revenue, which will be paid throughout the 30-year contract. The company also has to invest R$10.4 billion and will foot R$4 billion in operating costs.
The new concession includes 600 kilometers of roads, which connect cities such as São José do Rio Preto, Araraquara, São Carlos and Barretos. This is a new auction for two contracts that are about to end: Tebe, which is controlled by engineering companies, and Triângulo do Sol, owned by Bertin and the Italian group Atlantia.
Asked about the financial impact of the new project, Ecorodovias CEO Marcello Guidotti said the contract will reduce the group’s leverage ratio in the first years since it will generate more revenue than debt in the short term.
“We studied this project very well. It is a mature lot, with consolidated traffic, and a very simple capex in terms of engineering. There are no major works or complexities. [Input] inflation is about to peak and there are signs of improvement. All this was taken into consideration,” the executive said.
The company has been expanding strongly in recent years. Since 2019, three relevant road concessions have been signed: Ecovias do Cerrado (BR-364/365), with at least R$2.1 billion of capex; Ecovias do Araguaia (BR-153), in partnership with GLP, with R$7.8 billion in capex; and the Rio-Valadares corridor, won this year, with R$11 billion in capex.
Besides the auctions, last year the group signed an agreement with the São Paulo state government, in which it obtained an extension to its concession for the Imigrantes highway and included R$1.5 billion of new construction work, against payment of R$613 million to the state.
In June this year, the group’s net-debt-to-EBITDA ratio reached 4.1 times – compared with 2.6 times one year before. The current level is seen as relatively high in this industry.
As a result, the company had been signaling that it would be more selective in auctions, prioritizing assets that offer synergies with its network and that generate revenue from the start – as is the case of Noroeste, since the roads already have toll collection.
Mr. Guidotti said that the company has “these metrics [of indebtedness] very much in check” and that the project fits the group’s strategy.
The executive also highlighted that the group is still interested in federal road projects that could potentially be launched this year: the lots in Paraná and BR-381, in Minas Gerais.
“They are our priorities. They are very likely to come out this year. Maybe [there will be a delay because] because of the election, but these are state plans, not government plans. These are very important corridors,” he said.
With the victory in the auction, Ecorodovias, controlled by the Italian group Gavio, is also consolidated as the main road operator in the country. The company, which was already the sector leader in terms of length of highways, now operates nearly 4,700 kilometers in Brazil.
The government of São Paulo celebrated the result. “We had the three largest highway operators competing in the auction, with a fierce competition, which is a reason for great pride,” said Tarcila Reis Jordão, the state’s deputy secretary of partnerships.
The state administration had canceled two road projects: Litoral Paulista, which was questioned by the state’s court of accounts, and the public-private partnership of Rodoanel Norte, which, in a first attempt, did not draw any interested buyer. The government has published the call for bids and scheduled a new auction for Rodoanel – a new section of the beltway around São Paulo –, but the decision on the competition will be left to the next administration. The competition has been scheduled for January.
They disbursed R$15.5bn in farm loans in July and August, more than private-sector banks
09/15/2022
Corn harvest in Campo Verde, Mato Grosso — Foto: Fernanda Pressinott/Valor
Credit cooperatives extended R$15.5 billion to farmers in lines linked to the 2022/23 Crop Plan in the first two months of the season, up 11% year-over-year, and surpassed private-sector banks in terms of volume of funds lent to this public through the financial system – excluding issues of agribusiness bonds. They are second only to state-owned lenders, a group led by Banco do Brasil.
Thiago Borga, coordinator of credit at the Organization of Brazilian Cooperatives (OCB), said that credit cooperatives had already been standing out for the volume of transactions carried out, aimed especially at regular expenditures, with an important role in the spreading of farm loans across the country. In addition, the increase in the subsidy limits destined for these lenders is one reason for the higher amount released to farmers in July and August.
“The segment’s goal is always to serve the farmers in the most efficient way – at the speed required by agriculture for the arrival of credit and at the most adequate cost. The consolidation in the second place in this ranking will result from the efficiency of credit cooperatives,” Mr. Borga told Valor.
Currently, 519 cooperatives offer farm loans, many of them linked to cooperative systems like Sicoob, Sicredi and Cresol. Others operate independently, such as Credicoamo and Credialiança. These five entities received more than R$40 billion of subsidies from the National Treasury to offer lines aimed at regular expenditures and investments during the 2022/23 Crop Plan, which is an advantage considering the rising interest rates in Brazil. In 2020/21, when Credialiança was not yet part of the group, loans totaled R$19.3 billion.
The allocation of subsidized rates by private-sector banks stood at R$1.7 billion in 2021/22 (Bradesco, BDMG, Banrisul, BRDE, CNH Industrial) and R$2.5 billion in 2022/23 (Banrisul, BDMG and BRDE).
Sicredi is one of the main players in the segment. In this crop, it is expected to lend R$50.6 billion to farmers. In the first two months of the cycle, it disbursed R$11.6 billion through 93,000 operations, including financing through Rural Producer Bills (CPR), which exceeded R$2 billion.
Luis Henrique Veit, Sicredi’s head of agribusiness, links the good performance of cooperatives to their broad bases and close relationship with members. “We have the expertise and tailored service.” The cooperative serves 650,000 farmers across the country. In about 200 cities, it is the only lender present.
With a growing demand in the sector, the cooperative has made efforts to increase fundraising in order to offer more loans. Mr. Veit said there is room to increase the subsided amount, now at R$15 billion, by up to 40%. Sicredi has also issued more Agricultural Credit Bills (LCAs) and is the main on-lending player for funds from the Brazilian Development Bank (BNDES). By Tuesday, Sicredi had already received R$3 billion from the state-owned bank.
Several cooperatives are also accredited in BNDES, seek funds from this source, and bridge the gap between development programs and cooperative farmers. Besides Sicredi, Cresol, Bancoob, and Credicoamo also took funds from the bank to extend farm loans between July and September. Part of the strategy of the cooperatives is to increase their physical presence. In the last two years, more than 1,100 units opened in Brazil. In March, there were already 8,153.
In recent years, credit cooperatives had already been reducing the distance to private-sector banks in terms of disbursements through Crop Plan’s official lines, but they had not yet surpassed these lenders, a group led by Bradesco, Santander, and Itaú. In the 2020/21 crop, when R$246.1 billion were disbursed by all players, the difference was R$8.6 billion, the lowest to date. In 2021/22, it rose to R$9.4 billion.
The cooperatives also lagged behind private-sector banks when comparing the first two months of the last five harvests. In 2021, the private-sector group lent R$14.4 billion. In 2022, R$11.5 billion were lent in the period, down 20%. The biggest decrease was Itaú’s, to R$1.5 billion from R$2.4 billion. But Bradesco and Santander kept pace, with R$4.2 billion and R$2.3 billion, respectively.
As private-sector banks direct funds from savings accounts to investments in housing credit, state-owned banks and cooperatives received larger subsided limits for farm loans this crop, which became a huge advantage considering that Brazil’s key interest rate is 13.75% per year. Private-sector lenders also adopt different allocation speeds, so as not to miss the pace and be forced to “close the portfolio” early. “The broad scenario is of scarcity of farm loans, in which banks have placed themselves as ‘fund takers’ of each other at rates close to the ceiling rate,” said Itaú BBA.
Private-sector lenders, however, have open doors to fund Rural Producer Bills (CPRs), issue bonds, and do structured transactions, which are not accounted for in these calculations. With insufficient subsidized money to foster agriculture, private-sector banks can recover the lost ground through non-earmarked funds.
The Brazilian Federation of Banks (Febraban) said that the first month of the crop year was impacted by the reallocation of subsidized lines by the Ministry of Agriculture, but that the lenders will resume the pace. “Besides the 30.83% increase in the allocation of these funds, there was an internal reallocation of funds, directed almost entirely to the credit cooperatives. Moreover, July is the month in which banks adjust systems and processes to put in place the agricultural policy established by the Ministry of Agriculture and the Central Bank,” Febraban told Valor.
Harvest reached 126.9m tonnes, compared with 126.6m projected in August
09/15/2022
The Brazilian Association of Vegetable Oil Industries (Abiove) has revised upwards estimates for soybean harvest, processing, and exports in 2022.
According to new figures released on Wednesday, the harvest reached 126.9 million tonnes, compared with 126.6 million calculated in August. Even so, the result is lower compared to last year (138.9 million tonnes) due to a harvest loss in the South region and part of Mato Grosso do Sul.
For the processing of the raw material, Abiove’s forecast for this year increased to 48.9 million tonnes from 48.6 million – compared with 47.8 million tonnes in 2021. The projection for soybean exports was adjusted to 77 million tonnes from 76.8 million. Despite the revision, the figure is still down 10.6% from last year.
With the increase in the estimate for processing, Abiove started to project soy meal production of 37.4 million tonnes in 2022, 200,000 tonnes more than last month’s estimate, and up 1.6% from 2021. Projections for exports of soy meal were increased by 100,000 tonnes, to 18.7 million – up 8.7% from last year.
As for oil, the production estimate continues at 9.9 million tonnes, up from 9.6 million tonnes in 2021, while exports are projected at 2.2 million tonnes, up from 1.7 million tonnes last year.
In total, Abiove estimates revenues from soy exports in 2022 at $57.8 billion, nearly $10 billion more than last year. Soybeans are expected to generate $45 billion; soy meal is seen as bringing $9.4 billion, and oil will raise $3.4 billion.
Economy Ministry is studying band for volume of reserves
09/14/2022
Rule adds instability to the market because the Central Bank would also become a buyer of foreign currency in a moment of scarcity — Foto: Scott Eells/Bloomberg
The eventual adoption of a target for foreign exchange reserves could usher in a procyclical exchange rate policy, intensifying exchange rate fluctuations rather than smoothing them out.
The proposal studied by the Economy Ministry, unveiled Tuesday by the newspaper O Globo, is to establish a kind of band for the volume of forex reserves. When the reserves exceed the ceiling, the Central Bank would be obliged to sell reserves. When they are close to the floor, it would have to buy.
The idea goes against the whole philosophy of the exchange rate policy adopted by the Central Bank, which seeks precisely to contain the volatility of the foreign exchange rate and act when the foreign exchange market is dysfunctional.
The volume of foreign reserves usually grows, reaching values close to an eventual ceiling, precisely when more dollars are entering the country. On these occasions, the Central Bank typically buys more currency to counteract an excessive appreciation of the exchange rate disconnected from the long-term fundamentals. If it is forced to sell reserves instead of buying, it will intensify the tendency for the real to appreciate.
The situation would be more dramatic if the Central Bank, under the new rule, was forced to buy dollars when reserves fall below some sort of floor. Reserves usually fall exactly at times of great stress in the market, when the monetary authority usually injects liquidity to avoid an exchange rate overshooting.
The rule designed by the Economy Ministry adds instability to the market because the Central Bank would also become a buyer of foreign currency in a moment of scarcity of hard currency in the market.
The rule also limits the Central Bank’s ability to influence the market without necessarily selling dollars. Brazil’s high volume of reserves helps calm the market, which knows that there is a big player capable of stabilizing it.
If it has to obey a floor, this means that the effective volume of reserves is smaller. It is a situation similar to that experienced when Brazil borrowed from the International Monetary Fund (IMF), but could not use it, because one clause of these programs was precisely a minimum volume of international reserves.
The move to limit the use of foreign reserves by the Central Bank is surprising because, in the law that granted independence to the bank, the Economy Ministry gave up the right to dictate the direction of exchange rate policy. Until then, Law No. 4.595, of 1964, determined that the Central Bank was the executor of exchange policy, which was determined by the National Monetary Council (CMN).
Apparently, the economic team’s concern in limiting the use of foreign reserves is a fiscal issue. The proposal is being developed together with the limit on public debt, within the new rule being studied by the economic team to replace the spending cap rule, which limits growth in public spending to the previous year’s inflation.
In fact, the fiscal cost of foreign reserves is a relevant topic. In the past, the Central Bank offered currency hedges to the entire economy, and the costs ended up being borne by the National Treasury. This usually occurs when the Central Bank seeks to defend an exchange rate completely disconnected from economic fundamentals.
Before taking over as Central Bank president, economist Ilan Goldfajn even suggested the creation of an Exchange Rate Policy Committee, with the Central Bank and the Treasury, precisely to take into account the fiscal costs in the execution of the exchange rate policy. After taking over, however, Mr. Goldfajn never mentioned the idea again.
But at least that proposal had the advantage of giving flexibility in managing the fiscal costs of exchange rate policy, without creating an automatic rule that adds volatility and works as a straitjacket for the Central Bank’s actions.
The position adopted by the European Parliament on a regulation aimed at “deforestation-free” products will inevitably impact the European Union’s relations with Brazil, analysts say.
“The question now is whether today’s [Tuesday’s] vote will impact the negotiations of the additional environmental instrument as part of the ratification of the EU-Mercosur agreement,” said Emily Rees, director of Brussels-based consultancy Trade Strategies. “The Czech Presidency of the [European] Council will now have to evaluate these two dossiers side by side.”
Brazil, along with 13 other commodity-producing countries, recently stressed the importance of being consulted before the European decision-making process moves forward. The EU Commissioner for Environment, Virginijus Sinkevicius, acknowledged in a debate in Parliament that expanding the scope of the regulation to more commodities such as corn and chicken meat could “overload the system at the beginning” and lead to a dispute in the World Trade Organization.
Pedro de Camargo Neto, a leading agricultural specialist and an independent member of the board of Brazilian meatpacker BRF, one of the world’s largest poultry producers, the advancement of this “controversial legislation does not help the essential rapprochement of Brazil with the European Union, a region where we have very strong cultural, business and trade links.”
Companies have made an effort to ensure the complete legality of the production chain by tracing the acquisition of inputs, he said. The introduction of an additional complement, where something that goes beyond the national legislation is required, introduces an unnecessary complicator, he said. “About 90% of deforestation today is illegal. Complicating things by introducing the requirement to prohibit even legal deforestation hinders even the pressure that the organized sectors in Brazil have been putting on the public authorities to enforce environmental legislation,” he said.
Pedro de Camargo Neto recalled that the markets are already in turmoil as a result of the Covid-19 pandemic and the war in Ukraine. And that even the European Union is facing adjustment difficulties at this time, hence the difficulty of understanding the “untimely” introduction of a future new requirement.
Natura’s board meets as of Wednesday to discuss a reorganization that could spin off businesses into three independent companies
09/14/2022
Natura made – and acknowledged – several mistakes in the integration with Avon, notably in the remuneration of sales consultants — Foto: Hermes de Paula/Agência O Globo
By abandoning the global dream started a decade ago with the acquisition of Australia’s Aesop, Natura&Co may be giving some respite to investors who have faced massive losses on the stock exchange over the past year, despite the market’s first negative signs.
On Tuesday, the shares plunged again, falling more than 6% after the website Capital Reset reported that Natura&Co plans to concentrate operations in Latin America, abandoning its global platform. Natura’s board meets as of Wednesday to discuss the reorganization, which could spin off businesses into three independent companies.
Natura has already signaled a drastic cut in the holding company’s expenses. In the first conference calls after taking over as CEO, Fábio Barbosa said he had identified measures, which included layoffs, that would allow the holding company to reduce expenses by 40%.
“The holding company was getting heavy,” the CEO said, stressing that there were no decisions on the group’s four major brands – Natura, Avon, Aesop and The Body Shop.
In the view of an asset manager that holds Natura shares, changing the structure of the big brands is the key to improving the return on assets. Therefore, the way stocks reacted Tuesday and the latest reports show that asset management companies are “lost,” with recommendations seemingly outdated.
Contrary to what it may seem, argued a Rio de Janeiro-based asset manager, concentrating business in Latin America is the best decision and has the potential to recover some lost value. Since the peak on July 12, 2021, when the holding company was valued at R$84 billion, Natura plummeted 74%, wiping out R$60 billion.
Natura made – and acknowledged – several mistakes in the integration with Avon, notably in the remuneration of sales consultants, but it is also a fact that a course correction is already underway, with signs of recovery in the results in Latin America.
What would explain, then, the company’s struggle in the stock exchange? One argument is the difficulty in communicating with the market, which hinders analysts’ visibility of the business. But this has also started to change with the hiring of Mr. Barbosa and the change in the investor relations team. Helena Villares, who covered consumption for Itaú BBA, was hired in July.
An investor said that all of Natura’s problems seem to be priced in – even exaggeratedly. Considering the sum-of-the-parts valuation, the company seems cheap, especially at a time when the management team indicates that it may break up the business to create (or recover) value. “The stock is cheap, considerably cheap. It could potentially be worth twice the current price,” another asset manager said.
In a report released Monday, BTG Pactual analysts acknowledged that the asset sale could be a trigger, but pondered that any recovery still depends on a successful restructuring.
Moreover, short-term fundamentals are negative, with margins still pressured and sales weak while rising interest rates continue to weigh on financial expenses. Natura’s leverage ratio (net debt-to-EBITDA) is 3.5 times. “There is little room to improve the bottom line,” wrote Luiz Guanais, Gabriel Disselli and Victor Rogatis.
For those betting that the stock will rise, short-term results – the third quarter will still be bad – cloud the potential of the spin-off. An asset manager reckons that Natura alone is worth between R$25 billion and R$30 billion, considering a reasonable multiple (enterprise-value-to-EBITDA ratio) of 10 times. The company is currently worth R$22 billion.
“The market is placing a negative price tag on The Body Shop, Avon International and Aesop,” the asset manager said. In the restructuring, the spinoff of Australia’s Aesop, a company that shows continuous growth with high margins (16%), would generate value for the business either in a stock exchange listing or in the sale of the business.
Britain’s The Body Shop, however, is a more complicated matter. The business is not growing and suffers from high inflation and the UK’s embattled economy. The company bought for €1 billion from L’Oréal in 2017 is unlikely to reach a similar valuation soon, but Natura can still come out on top by disposing of the asset, one asset manager said.
Avon International’s assets left in Europe face a different situation. Without great chances of being sold, the best alternative for them may be to close loss-making operations around the world, which has already been happening. “The idea is to reduce as much as possible the presence in countries where we continue to operate with losses and, especially, with negative cash flow,” said Guilherme Castellan, Natura &Co’s chief financial officer, in the last earnings conference call.
Even if it concentrates operations in Latin America, where it holds a relevant market share – mainly in Brazil –, Natura’s problems will not be fully solved. The integration between Natura and Avon still generates many cultural problems between both teams, several sources told Pipeline, Valor’s business website.
Among employees who already knew Natura, the arrival of Avon represented a blow – including in their bonuses – and many consider that the merger has worsened the company and work. On Avon’s side, the pressure for results is increasing, which causes employees to leave.
Last month, for example, Avon’s chief marketing officer Danielle Bibas left after nearly 13 years at the company. And Diego Santelices, one of the executives who headed Avon’s successful sponsorship of the reality television show Big Brother Brasil, decided to leave the company for Electrolux, a household appliance manufacturer.
“Avon’s team feels very insecure. Since Natura bought it, there have been several cuts. My boss was fired and can’t even say goodbye to the employees,” a source said. In the outplacement consultancies financed by Natura, “every appointment has a new [former] Avon [employee].”
While dealing with the cultural frictions of integration of this size, Natura has also decided to transfer the whole Avon administrative body – around 600 people – from Interlagos (in the south zone of São Paulo) to Natura’s headquarters on the other side of the city. The change is expected to materialize in early October.
Natura did not immediately reply to a request for comment.
The original story in Portuguese was first published on Valor’s business website Pipeline.
*By Luiz Henrique Mendes, Raquel Brandão — São Paulo
New contract provides for investments of R$10.4bn in construction
09/14/2022
Tarcila Reis Jordão — Foto: Silvia Zamboni/Valor
The government of São Paulo is expected to hold the Noroeste Paulista lot auction this Thursday. It is the new bidding of two toll road concessions that are coming to an end: Tebe (controlled by engineering companies) and Triângulo do Sol (owned by Bertin and the Italian group Atlantia).
The lot includes 600 kilometers of roads, which connect cities such as São José do Rio Preto, Araraquara, São Carlos and Barretos. In all, the new contract foresees R$10.4 billion in capital expenditure in construction, in addition to R$4 billion in operating costs over the course of the 30-year contract.
Among the main interventions, 123 kilometers of road dualling, 99 kilometers of third lanes, 42 pedestrian overpasses, and others are planned. “The new concession is a mature asset from the standpoint of demand, but it needs to expand its capacity,” said Tarcila Reis Jordão, São Paulo’s deputy secretary of partnerships.
In the market, the forecast is that there will be at least one person interested in the asset. The São Paulo government believes there will be competition. “The expectation is very positive. There is a prospect of two to four bidders, which is very relevant for a R$10 billion investment project, on the eve of an election and after all these input price variations. We are excited,” Ms. Jordão said.
Pátria is pointed out as a strong candidate, due to the synergy that would exist with the road network already operated by the company. Last week, CCR told Valor that it would “most likely” compete for the asset. Ecorodovias has also hinted to the market about its interest in the project, although its high level of leverage is seen as a possible obstacle.
Besides these groups, Arteris and Acciona have analyzed the asset, according to sources. Arteris could also see synergies, but has not participated in auctions for years and was put up for sale by its shareholders, which reduces any expectation about it.
Ecorodovias said it seeks “projects that have synergy with the concessions portfolio and are aligned with sustainable growth guidelines.” Arteris says it “evaluates opportunities for new projects that fit the requirements of risk-return required by its shareholders.” Pátria and Acciona declined to comment.
A factor that helps to make the concession attractive, according to analysts, is that tolls are already charged on the highways, in addition to a known traffic history, which reduces the risk of demand and guarantees revenue generation since the beginning of the contract.
“The fact that these are highways that were in the hands of two concessionaires is well regarded. Besides the question of demand, there is more security in relation to the conditions of the roads than if they were operated by public agencies,” said Letícia Queiroz de Andrade, a partner at the law firm Queiroz Maluf.
Caio Loureiro, a partner at the law firm TozziniFreire, the perception that this is a low-risk project could even attract the participation of a new entrant.
In the bidding, the winner will be the one who offers the highest fixed concession payment, whose minimum value was set at R$7.6 million. In addition to this initial payment, the contract provides for a variable disbursement of 8.5% of gross revenue.
The funds from the variable fee should be mostly destined for an account that will serve as a “safety cushion” to mitigate the risks of toll default. The project foresees free-flow toll collection. In this system, there are no toll plazas, and the fee is collected electronically (through gantries), according to the distance traveled. The transition from the physical plazas to the system will take seven years.
The new concession foresees a 10% reduction in the value of the tariff in relation to the prices currently charged. For vehicles that use toll tags, there will be another 5% reduction. Besides this, the project foresees additional discounts for frequent users.
According to analysts, this auction will not necessarily be the last major highway bid this year. Mr. Loureiro, with TozziniFreire, points out that there are still expectations regarding other relevant federal projects: the auction of the BR-040 highway, between Minas Gerais and Rio de Janeiro; one or two lots of the Paraná highways; and the BR-381 highway, in Minas Gerais.
For Ms. Queiroz, the greatest demand today is for medium-sized projects, not large auctions. “The market is heated, there is interest mainly in smaller projects, in the states,” she said. Today, however, these initiatives are affected by the elections, which cast doubt on the continuity of the concessions.
Controlling shareholders of IGB Electronics launched tender offer to buy out minority shareholders
09/13/2022
Gradiente unveiled the intention to go private by acquiring shares from minority shareholders. The transaction is a step for IGB Electronics to exit the judicial reorganization that has been dragging on since 2018. With no prospect of resuming electronics production, the company still hopes being able to license the Gradiente brand for use by third parties, but there is no plan in place at the moment to implement this possibility.
Gradiente was one of the largest electronics companies in Brazil in the 1970s. Today, however, IGB is a non-operational company, and revenues come from leasing its factories in the Manaus Free Trade Zone.
Last Friday, the controlling shareholders of IGB Electronics launched an offer to pay R$40.51 per IGB share. The financial volume totaled more than R$1.7 million, compared with R$31,000 on Friday. The amount offered implies a 55% premium over the previous closing price.
The process of going private was already planned in its judicial reorganization approved by a court from Amazonas in 2019, said a source linked to the company, who spoke on condition of anonymity. “Today IGB is a security with derisory volume of trade, and having public float hinders the ability to leave the judicial reorganization,” the source added.
The offer was launched by controlling shareholder HAG Holding, a company created in 2008 to encompass the assets of Gradiente, which has Eugenio Emilio Staub as the only partner. The funds to buy the shares will be disbursed by Mr. Staub himself, the source said.
In 2021, IGB Electronics posted a net loss of R$54.1 million, a 36.1% reduction in losses compared to the previous year. Net revenue totaled R$5.5 million, up 5% compared to 2020.
“The main reason for going private is to reduce costs. Today, keeping the company public costs about R$1.5 million per year. In addition, this will eliminate speculation involving the securities,” the source said. IGB has about 850 minority shareholders, of which 761 have less than 1,000 shares.
A case of constant speculation involving IGB stock is the lawsuit the company is filing against Apple for the use of the iPhone trademark. In progress for more than 10 years, an appeal filed by the company is currently on hold at the Federal Supreme Court (STF) awaiting trial.
After successive defeats in court, last July, Prosecutor-General of the Republic Augusto Aras gave an opinion against IGB’s request, saying that Apple has the rights to use the iPhone trademark in the country, despite Gradiente’s claim that it registered it in 2000, seven years before the launching of the American cell phone.
The process of going private has nothing to do with the lawsuit involving Apple and the iPhone, said the source linked to the company. After a conciliation hearing failed to result in an agreement, the case awaits trial, with no set date.
After the end of the process, expected to happen in the coming weeks if there is no request for a meeting by up to 10% of minority shareholders, IGB plans its exit from the judicial reorganization process. The company recently reached an agreement with the Secretariat of Federal Revenue to renegotiate debts.
The source said that IGB only continues to exist for emotional reasons of the controlling family.
Founded by a group of engineering students from the University of São Paulo (USP) in October 1964 as a manufacturer of transistors amplifiers, an innovation at the time, the company was sold to businessman Émile Staub in 1970, who soon passed the control to his son, Eugênio, who remains at the head of the company.
The company was one of those that best benefited from the economic miracle of the 1970s, going public in 1974, taking advantage of the import restrictions imposed by the military government, gaining scale by producing the most varied electronic products, notably stereos, in its factories in the Manaus Free Trade Zone.
The situation began to change in the 1990s, with the opening of the economy during the Collor administration, when Gradiente found itself swallowed by the entry of electronic products from Asia. The company tried to diversify its production, betting on videogames, with a partnership with Nintendo, but never managed to get back on its feet.
After successive unsuccessful attempts at restructuring, Gradiente, then known as IGB Electronics, a maneuver made to avoid the company’s bankruptcy and subsequent loss of the brand, filed for protection from creditors in 2018, a process that has dragged on ever since.
Sought for comment, the company shared the notice of material fact sent to the market last week.
Companies reported highest monthly output this year, but credit crunch is affecting consumers
09/13/2022
August was an exceptional month for the automotive industry when compared to the entire period following the start of the pandemic. Production volume was the highest in the year, up 43.9% year-over-year. In addition, production through August reversed the decline to a 4.7% growth and, for the first time in the year, no plant stopped for lack of semiconductors.
While industry leaders have many reasons to celebrate, a number of factors, on the other hand, are cause for concern. The main one continues to be the credit crunch. In August, 70% of the new vehicles sold were paid for in cash.
The leaders of the segment acknowledge that this result is not good because, far from revealing that the consumer, in general, has surplus cash, it actually exposes the difficulty in accessing credit, including high interest rates.
Consumers who need financing to buy a car are not in the market, and those who have funds available are once again doing the math to find out whether it is worth spending the money to buy a good that depreciates as soon as it leaves the dealership.
Márcio de Lima Leite — Foto: Silvia Zamboni/Valor
A good part of the cash sales was seen in regions where agriculture is the main activity, said Márcio de Lima Leite, head of the National Association of Vehicle Manufacturers (Anfavea), during the presentation of the sector’s performance last week.
The cash payment modality has also been sustained, in part, by direct sales, or deals closed directly by automakers with large fleet owners, mainly rental companies. The participation of direct sales of automobiles and light commercial vehicles from January to August is noteworthy: 53.3%, according to data from the National Federation of Automotive Vehicles Distribution (Fenabrave).
According to Fenabrave, Fiat was the brand that sold the most in the first eight months of the year, both in retail and direct sales. The second place changes, however, depending on the modality. In retail, the second place went to General Motors, followed by Toyota. In direct sales, Volkswagen took second place, followed by GM. VW’s Gol leads the direct sales ranking in August, but in retail, GM’s Onix was in the first place.
The credit restrictions also hit the second-hand car market, which, during the peak of the semiconductor crisis, was the option for those who did not want to wait in line for new ones. According to Fenabrave, in August, the used car and light commercial sales fell 9.8% year-over-year. In the year-to-date, the drop is 18.12%.
The growth in production, domestic sales and exports last month reveals that the pace of the assembly lines was accelerated thanks to a better offer of semiconductors. The executives of the sector already expected that, in August, Brazil would benefit from the vacation season in the Northern Hemisphere, which reduced demand for chips in Europe and the United States. It is unclear, however, what the supply of semiconductors will look like in the coming weeks.
According to Anfavea, to reach the goal of a market of 2.14 million vehicles in 2022, automakers need to sell 198,000 units in September, 196,000 in October, 204,000 in November, and 233,000 in December. The association is preparing for weaker sales during the World Cup. In August, 208,600 vehicles were sold, up 20.7% year-over-year.
Anfavea maintains its optimism in relation to the domestic market. It considers that sales in recent months have been much more impacted by the lack of supply, caused by the shortage of semiconductors, than by economic factors.
Truck and bus manufacturers are preparing for the last four years of euphoria. With the new emissions rule starting in January, prices will rise. For this reason, many transportation companies have brought purchases forward this year.
The leaders in the sector are now engaged in trying to attract investments from the semiconductor industry to Brazil to reduce dependence on Asian supply, where it is concentrated. This week, a delegation formed by representatives of Anfavea and the federal government is in Japan to present projects to potential investors.
On the external front, the situation in Argentina continues to worry the industry installed in Brazil, which depends, as do other exporters, on foreign exchange reserves, which are increasingly scarce in the country. Argentina closed the month with $600 million in net reserves, according to that country’s central bank.
In Brazil, the employment data was also positive in August, with a slight increase of 1.1% in the permanent staff in relation to a year ago. But the scenario may change in the coming months since Mercedes-Benz announced last week its intention to eliminate 2,200 jobs and close 1,400 temporary jobs in its plant in São Bernardo do Campo, São Paulo.
Following the tendency of its main competitors, Mercedes is entering a new phase, focused on the outsourcing of part of its activities. Negotiations between the company and the local metalworkers’ union start Tuesday.
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