Opinion – Marcos de Vasconcellos: Record profit for companies on the stock exchange masks the outlook for the real economy

When reading the news about the companies’ balance sheets in the last quarter, the feeling one has is that we are flying in brigadier skies. Record profit for Petrobras, Vale, the banks and the entire group of companies listed on the Stock Exchange.

Suddenly, we noticed that the banks made record profits, but distributed less dividends to their shareholders. It was, in fact, the lowest dividend distribution of institutions since 2014. Crumbs, compared to the “record profit” announced.

It is also necessary to remember that some of our stock market champions are surfing the super highs of commodities. Petrobras, Vale and Suzano, which had the highest profit in the quarter, account for almost 29% of the Ibovespa. This, by the way, explains the good performance of our main stock index this year, while the big global markets melt.

Even taking these three companies out of the account, the group of 356 companies listed on the stock exchange profited R$ 901.8 billion in the first three months of this year. That’s 44% more than in the same period in 2021, according to Economatica, a company that sells market data.

And if the country’s main companies profited 44% more, why don’t we feel the increase in the circulation of money in our daily lives? Do you know at least five people who have had a 40% increase in their earnings in the last year? You can’t just blame inflation for the difference, whose jump in the last 12 months was 12.13%.

It turns out that, contrary to what our logical thinking says, the increase in profit does not translate into business growth. Sometimes, it’s just the opposite.

The turnover of the stock exchange companies in the first quarter of this year was even higher than last year, but around 24%, according to a study by BTG Pactual. Well below the 44% profit increase.

Added to this, a fall in the dollar led to a significant reduction in expenses for large companies. In one year, the accumulated fall in the American currency against the real is already more than 8%.

And here comes the crucial point to be analyzed in conjunction with the rise in profits: the fall in corporate indebtedness. Big Brazilian companies are taking on less debt. Money is costing dearly, with our current benchmark interest rate (Selic) at 12.75% per year.

While, for your private life, cutting debt is usually a reason to celebrate, in a large company, the decrease in indebtedness usually translates into less investment in expanding the business, generating new jobs and creating new fronts.

Companies listed on the stock exchange are rapidly reducing their leverage, which is the ratio between net debt and Ebitda (earnings before interest, taxes, depreciation and amortization). In other words, they are taking less risk, placing fewer bets on their own growth.

In 2019, the net debt/Ebitda ratio, which, simply put, says how long it would take for the company to be able to pay off the debts it has, was at 2 years. In 2015, it was at 2.9 years. Today, it’s just over a year and a half. This is without taking into account Petrobras and Vale, whose colossal sizes end up harming the samples.

In the short term, this translates into increased profits, but it brings the prospect of an economy that moves more slowly than we have been used to in recent years. I’ve already mentioned here how the big funds are with full cash, waiting for some certainty to place their bets. For companies seem to be at the same impasse.

Recently, the educated manager of SF2 Investimentos, Sérgio Machado, brought a valuable tip on his Twitter profile: The best thing for this moment of so many uncertainties is to try to navigate in short journeys, leaving the plans for great crossings for when there is more information or table settings.

The good side is that the recent rises in the stock market make it clear that there is no lack of opportunities for these small journeys.