Welcome to our weekly roundup of news from South America.
Mosoj ESG provides information, data and analyses relating to South America integrating Environmental, Social and Governance topics to promote sustainable development.
Brazilian Meat Inc : measuring performance
Brazil’s meat industry giants – BRF, JBS and Marfrig – have all recently released their Q3-2020 results, displaying strong results in nominal terms (but not in dollar-terms), thanks to an internal market continuing to support overall operations, while international markets’ demand recovered from the lows of Q2-2020. Of note, most of the good news came from the pricing rather than the volumes.
Source: Moody’s analytics, Mosoj ESG calculation
There however remain some concerns about 2021, and to what extent the economic recovery will continue. Furthermore, rising prices of food at home may impact demand for meat, particularly when the huge fiscal help from the government comes to a stop. At the same time, there could be some margin pressures from rising raw material costs, spurred by economic growth recovery across the world. Some of these concerns appear to be reflected in the companies’ stock-market performance vs a year ago, particularly for JBS and BRF, with Marfrig outperforming them.
Source: Money.net ; JBS is the white line
In relative terms, however, using our benchmarking methodology, there appears to be quite a bit of volatility in the way BRF and Marfrig are managed when comparing them to a universe (thousands) of companies operating in the sector (see grey area in graphs below). JBS’ performance in contrast appears to be more stable over the years, which is a positive in terms of their strategic positioning and management’s performance relative to the industry.
This means that we can expect more consistent returns for JBS, and expect that they will benefit more from the long-term positive prospects of the meat-industry. It also suggests that they will be more aware and receptive to ESG concerns raised by the asset management industry.
Below, the graphs aim to show the way management is managing its human resources, and can be seen as a measure of productivity.
When a company goes above the range, it suggests there is a squeeze in terms of human resources – ie. cutting costs perhaps beyond what is necessary, which could lead to a correction down the line. Often this is driven by wider concerns of boosting EBITDA in the short-term rather than long-term thinking.
On the other hand, if a company finds itself below the range, it also suggests some productivity issues and that there will be a correction relative to the benchmark. For instance, BRF was having some productivity issues since 2015 and hit a low point in 2018, going off range, before a correction happened. It now appears to have stabilised in 2020, which is a positive.
Finally, we took an interest in comparing the companies GHG emissions (scope 1 and 2) relative to other players in the industry, and measuring the intensity relative to the companies’ revenues and added-value.
Source: Companies’s public disclosures and Mosoj ESG calculation
Here, it appears that over the past two years JBS and BRF have been making progress, whilst Marfrig has stayed the same. Of note, both JBS and BRF had dedicated sections for ESG investors. It would be great to see if any progress along the same lines have been made in 2020, and so eagerly await further disclosures on their GHG emissions in 2020. Certainly, this is something we would like to track going forward.
What’s more, it is important to note that we do not include scope 3 here, as progress is very much outside of the companies’ control. Indeed, it relates to – in large parts – their supply chains, and would often account for the majority of GHG emissions. Ideally, we would like to see further disclosures from the companies operating in the supply chains themselves, although believe that with our benchmarking methodology and by looking at GHG emissions per unit of value-add (GEVA), we should be able to assign relative values to all eventually.
Tourism reports losses of $7.7 bn during the pandemic
$3 bn from the Bank of Brics will be invested in the country
11 Brazilian companies are in Dow Jones Sustainability Indexes
Rating agency maintains negative outlook for Brazil
São Paulo and Santa Catarina reach expressive marks in distributed solar generation
Strong demand for sugar in Brazil increases global deficit
Brazil to reveal countries that import illegal wood from the Amazon
Brics Summit exposes differences and cracks between Brazil and China
Elera invests $740 mm to double installed capacity in Brazil
Shortage of raw material is the highest in 19 years
Fecovita launched the first social, financial trust in the country for $3 mn
Saesa starts up thermal power plant that could generate $100mn a year
The automotive industry plans to increase production by 70% in 2021
Increase in grain prices will generate an extra $4.4 bn in foreign currency
A solar park built by Chinese companies supplies 300 megawatts
Pork product exports grew by 69.9% year-on-year
Burford Fund expects to raise to $14 billion for YPF’s nationalization
Government launches Gas Plan to produce 30 billion m3 in four years
The meat processing industry invests $187 mn to export 1.25 million tons of meat
Public debt increased by $19.85 bn in 11 months, 45% of the amount that renegotiated with the IMF
The government will finance $500 mn in sustainable development projects
Chile’s GDP shrinks 9.1% in Q3 2020
Chile issues new bonds for around $1.8bn
Chile’s SQM increases lithium sales by 56%
Government estimates maximum fiscal cost of 2nd 10% project at $2.154bn
Pacífico Sur completes process to acquire 65% of Sun Dreams
Enel starts building 163 MW solar plant in Chile
Chilean blueberry exports increase 15%
DP World to invest $45m in Chile’s Puerto Lirquen
Chile to reopen to international arrivals on 23rd November 2020
Colombia’s economy contracted 9% in third quarter
During the pandemic, household income has fallen close to $7 bn
Tax revenue collection in Colombia falls 5.7% in October
Remittances in Colombia reached $7 bn in october
Colombia seeks to expand its debt quota by $ 14 bn
Colombian Mining Ministry: $3.4 bn investments in hydrocarbons sector in 2021
Colombia announces initial $49 mn for recovery after hurricane Iota
Colombia adjusts projection of fiscal deficit for 2020 at 8.9% of GDP
Foreign direct investment in Colombia fell 27.7% to $ 5,8 bn as of October
Colombian airline Avianca reports $283.5 mn third-quarter net loss
Foreign debt reaches $11.62 bn, and Government announces steps to suspend payment for two years
Losses of more than $1 bn foreseen due to the paralysis of tourism
Blockades in Sipe Sipe generate daily losses of $2.43 million
Internet shopping in Bolivia grew by 21% during Covid-19
Sugar mills forecast an exportable balance of 3 million quintals of sugar
90% of the companies cannot pay Christmas bonuses in Sucre
Twelve productive sectors ask for credit and the injection of $60 mn
Businessmen ask the government for an economic injection of $4 billion
Banks invest up to $15 million in digital banking