Commodities stand out on the Exchange in the 3rd quarter, while retail suffers from high interest rates

Companies listed on the Brazilian Stock Exchange recorded a joint net profit of BRL 137.1 billion in the third quarter of 2022, which corresponds to a small growth of 2.3% compared to the same period last year, according to a survey. carried out by Einar Rivero, from the TradeMap data platform.

Commodity companies, particularly in the pulp and paper and oil and gas sectors, once again stood out positively amidst a scenario of restricted supply that kept raw material prices high.

Companies more focused on the domestic economy of consumption and retail, on the other hand, saw the level of profitability of operations being pressured by the macroeconomic environment with high interest rates and inflation.

According to XP Investimentos’ calculations, just over half of the balance sheets (55% of the total) came in above expectations, considering operating profit (Ebitda). Another 10% came in line with expectations, and 35% were below estimates.

According to Jennie Li, equity strategist at XP, the most recent season of quarterly results can still be considered positive, with Ibovespa companies delivering, on average, revenue and profit growth.

The specialist adds, however, that the numbers also make it clear that there was a slowdown in the pace of earnings compared to previous months, in the face of high interest rates in Brazil, and with inflation still at a high level, which pressured the purchasing power of the population in the period.

“The commodities sector continued to do well, with raw material prices still at high levels and exporting companies benefiting from a slightly more devalued real and a stronger dollar”, says XP’s stock strategist.

The pulp and paper sector, with names like Klabin and Irani, and the oil and gas sector, with PetroRio and Petroreconcavo, were among the main positive highlights of the third quarter, points out the expert. The metallurgical Gerdau, with strong operations in the United States, is also mentioned.

Jennie also claims that, even among the major commodity producers, the mining sector ended up being more negatively pressured due to the downward adjustment in the price of iron ore on the international market, amid the economic slowdown in China.

On the downside, she says that retailers like Via, Americanas and Magazine Luiza were among the companies on the Exchange most affected by the macroeconomic scenario of interest rates and inflation.

“The most important point of the season was showing that high interest rates had a very negative impact on the results of several companies”, says Fernando Siqueira, responsible for the research area at Guide Investimentos.

Although the operating result can be considered good, the profit was often harmed by the high financial expense in the wake of a Selic rate at 13.75% per year, says Siqueira. “This occurred, for example, with vehicle leasing and retail companies, among others.”

Consumption more focused on high-income consumers, such as Soma and Vivara, continued to show greater resilience than the industry average, says Jennie, from XP.

“Of the sectors more focused on domestic consumption, Ambev surprised with strong results in Brazil, offsetting the weaker performance of the international operation”, says the stock strategist.

Bradesco made a mistake in granting credit and was a negative highlight among banks

Also among the negative highlights of the third-quarter earnings season, Pedro Serra, head of research at Ativa Investimentos, points to the case of Bradesco, which saw profits fall by more than 20%, with shares having sunk around 17% after the disclosure of numbers.

“The banking sector had its results pressured by higher defaults, but in fact Bradesco was the major negative highlight, largely on its own account. The results of other banks showed that Bradesco made a mistake in granting credit and it was a very big surprise”, says Serra.

The TradeMap survey shows that, considering all banks with shares listed on the Stock Exchange, the combined profit reached BRL 28.1 billion in the third quarter of 2022, an increase of 15.5% compared to the same period of the previous year.

The Ativa specialist adds that, in a scenario of high interest rates, the real estate sector also ended up with weaker results, with the level of profitability under pressure and a slowdown in the pace of sales and launches.

4th quarter may bring contraction in the profit of companies on the Exchange

Serra also claims that Banco do Brasil and Petrobras showed strong results. However, he adds, there is a doubt regarding the performance of these companies in the next quarterly balance sheets, depending on the direction taken by the Lula government for companies under state control.

XP’s Jennie also says that looking at fourth-quarter estimates, we should continue to see a slowdown in corporate earnings growth, and possibly a contraction in earnings, according to consensus earnings projections indicated by Bloomberg.

In addition to the global macroeconomic scenario, which remains very uncertain, at the domestic level, we now have greater uncertainties regarding the fiscal trajectory, with discussions on the next economic team and on the spending ceiling, issues that have greatly stressed Brazilian assets, says the XP equity strategist.