Brazil Firms Shut Factories, Cut Pay and Pull IPOs Amid Crisis
(Bloomberg) -- Brazilian companies are taking drastic measures amid the coronavirus crisis as the disease spreads in Latin America’s largest economy. Closed storefronts and factories, furloughs and canceled flights foreshadow the economic slowdown ahead, which already has large banks forecasting a recession this year. The boom in stock offers is also largely off the table.
Here’s a summary of how some of Brazil’s main companies and sectors are being affected by the coronavirus pandemic:
National giant Petrobras was hit first by the oil price war, which caused the commodity to plummet, and then by the pandemic-fueled sell-off, which will probably delay the company’s plans to shed assets. The firm’s financing cost doubled. On Friday, Petrobras postponed the sale of its refineries, and asked banks to disburse $8 billion in credit lines.
Retailers and shopping malls
In São Paulo, the biggest city in South America, only pharmacies and supermarkets are allowed to stay open starting March 20 -- local governments in other cities including Porto Alegre and Belo Horizonte have taken similar measures. BR Malls, Aliansce Sonae and Multiplan announced the temporary closure of their shopping malls in Rio de Janeiro city as well, while fashion retailer Renner will close stores in Brazil, Uruguay and Argentina indefinitely.
Brazil’s government announced a package to help local airlines, which are the most affected so far by the crisis. Azul’s total capacity reduction, which is now of 60%, may rise to 80%, according to Chief Executive Officer John Rodgerson. Gol will reduce total capacity by 60%-70% by mid-June in the domestic market and 90%-95% of international flights. The company also announced its cutting wages and working hours in about 35% -- 40% for some top level executives. Carrier Latam will reduce capacity by 70%.
The mining giant said that its distribution center in Malaysia may be temporarily halted between March 21-31, which could have an impact on sales in the first quarter. Vale also placed the Voisey’s Bay mine, in Canada, on “care and maintenance” for four weeks as a precaution, which should reduce copper production. In addition, the shutdown of coal processing plants in Mozambique, initially scheduled for the second quarter, is being revised, which could affect the 2020 guidance.
The five largest banks associated with Brazilian Banking Federation have announced that they are open to meet requests for extension of debt maturities of individuals and micro and small businesses. The state-owned bank Caixa Economica Federal relased special credit lines, with a grace period of up to six months, for retail and service companies. For machinery and equipment, lines will have reduced rates for up to 60 months deadline.
JBS will halt operations in five of its 37 beef units in Brazil for 20 days due to lower export demand, while Minerva, the largest South American shipper, will pay workers for time off in four of its units. Chicken giant BRF said it sees low impact of coronavirus on Brazilian demand and is keeping its facilities, distribution hubs, logistics, supply chain and offices running as usual.
Ford, Toyota, Fiat Chrysler and Volkswagen announced the temporary suspension of local factories in coming days -- Ford will also stop its Argentina unit. General Motors and Mercedes-Benz will grant mandatory vacations from March 30, while Caoa Chery will gradually stop production areas starting next week. Audi, Honda, Nissan, Peugeot-Citroen and Renault are taking preventive measures, but have not yet decided on any action that could affect production lines. Truck and bus manufacturer Marcopolo, auto parts and the road implements producers Fras-Le and Randon are also placing employees on furlough.
Logistic company Hidrovias do Brasil, car rental firm Vamos, Caixa’s ensurance unit Caixa Seguridade, sanitation firm Igua Saneamento and medium size banks BV and Parana Banco postponed their IPOs. Another lending, Banco Daycoval, did the same, according to two people familiar with the matter. In total, 25 offers or IPOs planned to happen in Brazil this year will likely be affected by this crisis. Market turbulence also made petrochemicals firm Braskem postpone the release its fourth quarter earnings.
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