Read this Wednesday’s edition of the FolhaMercado newsletter (14) – 06/14/2023 – Market

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‘Inconsistencies’ are now fraud

Americanas admitted to the market this Tuesday that what happened at the company was a fraud – until then, the statement was in the tone of “accounting inconsistencies”.

• A report prepared by legal advisors points to the company’s previous board as guilty of the hole.

Understand the fraud: the report points out two main factors that ended up generating a gap in BRL 45.9 billion on retailer accounts.

1 – deals with a common retail operation in which manufacturers give discounts for large orders in exchange for displaying their products in retailers’ campaigns or in privileged locations in stores.

↳ But these discounts did not exist. The material fact says that they had no ballast, that is, they were created, but their value (BRL 17.7 billion) ended up being deducted from the balance sheet, which inflated Americanas’ profits and margins.

2 – talks about a term that had been mentioned at the time the scandal broke: the withdrawn risk. It is an operation in which the supplier advances the payment of goods with a discount to the bank, which becomes the retailer’s creditor.

↳ The material fact says that this and other maneuvers that added BRL 24.2 billion were made to generate cash for the company to continue operating. The problem is that they were not recorded as debt on the balance sheet.

Reaction: Americanas shares rose by almost 20% at the beginning of the trading session, but closed at a high of 6%. Since the scandal erupted, however, the devaluation is almost 90%.

Meanwhile, at CPI… The company’s current CEO showed emails and other exchanges of messages with supposed proof that the company’s balance sheets were intentionally altered. He also stated that there are indications of participation by audit firms PwC and KPMG.

Among the documents, there was one in which the former board cited a result of the “internal vision”, with a loss of cash generation for 2021 of BRL 733 million and another of “council vision”, which brings a profit for the same heading of almost BRL 2.9 billion –the latter figure was presented to the board and the market.

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The acid test for Fintechs on the Exchange

After the good performance in the first quarter, now Brazilian fintechs have the challenge of proving that they can maintain the pace of growth in their customer base and, at the same time, increase their revenue from them, say industry analysts.

• Here we are talking mainly about digital banks with shares on the Stock Exchange: Nubank, Inter, Stone and PagBank —formerly called PagSeguro

What happened in Q1: fintechs surprised the market by expanding their customer base in a difficult scenario, with high interest rates and record defaults.

• Which explains: banks have restricted lending to customers considered riskier. The vacuum was occupied by newcomers to the sector, who still registered low growth in defaults.

The barrier ahead: now, digital banks need to increase average revenue over customers, something incumbent rivals are experts at, with services, insurance offerings, etc.

The challenge was mentioned by Nubank recently, when it said that its revenue with each client is in $8.5right behind the benches ($40).

• To reduce the distance, roxinho focuses on high income and wants to be the main bank for users.

Inter, according to experts, is already on this path of favoring greater monetization than market share growth.

What about machines? Analysts want to see if Stone and PagBank will be able to maintain the trend of the beginning of the year, with an increase in revenue much greater than that of expenses.

• Which explains: companies are managing to diversify their operations, with expansion in the customer base and revenue growth due to the entry into the credit market.

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EU eyes Brazil’s green hydrogen

The President of the European Commission, Ursula von der Leyen, announced this Monday an investment of 2 billion of euros (about R$ 10 billion) in green hydrogen in Brazil.

She stated that the European Union has the objective of importing 10 million tons of renewable hydrogen every year. The statement was made after a meeting with President Luiz Inácio Lula da Silva (PT), at the Planalto Palace.

Understand: to be used as fuel, hydrogen needs to be separated from some raw material, which today is mainly of fossil origin, such as natural gas (grey hydrogen), oil (blue) or coal (brown), in processes that emit CO2.

• In this case, the energy source adopted is clean, such as solar or wind, a Brazilian differential.

The challenges: the main obstacle is the transport of hydrogen, which requires storage at low temperatures and high pressure. Technologies for large-scale production are not ready either.

The benefits are promising. Only replacing gray hydrogen with green would save 830 million tons of carbon per year, equivalent to the emissions of the United Kingdom and Indonesia combined, according to calculations by the International Energy Agency.

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Musk default left for Goldman

Elon Musk’s admitted default on Twitter’s office lease ended up slipping into Goldman Sachs, one of the US banks.

The social network has not deposited rents since November, and the billionaire has told officials he does not intend to restart payments or cover past due debts, according to lawsuits.

In numbers: overdue amount on Goldman commercial real estate loans rose 612% in the first quarter of this year, to $840 million (BRL 4.08 billion).

• Default on the same type of credit throughout the US banking sector had a much smaller increase in the period, from 30%for $12 billion (BRL 58.35 million).

Goldman does not own Twitter’s buildings, but it is a creditor of Columbia Property, a fund that houses two of the social network’s large offices and which defaulted on loans to Goldman in February.

Disturbing, but little: the American bank does not have that much exposure to the sector, which means that the default by Twitter –and, consequently, by Columbia– does not have a relevant impact on its result.

Speaking of Goldman… the bank is experiencing an internal battle between its executives and partners over some decisions made by the CEO, David Solomon, involving bonuses, strategy and even its DJ side, reported the Wall Street Journal this Tuesday.

Unlike most other banks, Goldman maintains a partnership of around 420 executives, who, according to the newspaper, consider themselves as important as the CEO.

Solomon, who has performed as a DJ at nightclubs and festivals, has been criticized by a longtime partner and the secretary of the bank’s board, who said it didn’t look good for a CEO of one of Wall Street’s biggest companies.

A bank spokesman told the WSJ that the differences of opinion reflected healthy debate within the company.