Read this Wednesday’s edition of the FolhaMercado newsletter (17) – 05/17/2023 – Market

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What changes with Petrobras’ new pricing policy

Petrobras announced this Tuesday (16) the new pricing policy that will replace the PPI (import parity price) strategy, which defined readjustments based on simulations on the cost of importing products.

Understand: in a material fact disclosed to the market, the company did not give many details, saying, among other things, that it will practice competitive prices in the markets where it operates, preserving its profitability.

The absence of a fuel pricing formula was criticized by the sector as a factor that does not bring predictability to prices and hinders the dynamics of importing derivatives – which takes 60 days from purchase to arrival in the country.

What changes? In theory, nothing, or almost nothing, writes Vinicius Torres Freire in analysis.

• In practice, says the columnist, we will know in a few months, depending on what will be done with prices, their relationship with international quotations, and what the company’s result will be.

One of the changes is in the section where the company says it will take into account the competitive price in each market and region.

• Other factors considered are the supply alternatives –competition– and opportunity cost –up to which value the state-owned company could sell the product.

Petrobras will not fail to follow the international prices of oil and its derivatives and says that the readjustments will not have a defined periodicity – two things that already happened in the PPI.

Reaction: the state-owned company’s shares closed the day up by just over 2%, with the market also assessing that the changes have little effect on fuel pricing, but keeping an eye on what will happen when oil prices rise abroad.

The company took advantage the date for disclosing reductions in the prices of gasoline, diesel and cooking gas.

• The price of gasoline at the state-owned refineries will drop 12.6%, or R$ 0.40 per liter.
• The price of diesel will be reduced by 12.8%, or R$ 0.44 per liter.
• The price of cooking gas will drop 21.3%, or R$8.97 per 13-kilogram cylinder.

The transfer to the consumer depends on the commercial policies of distributors and service stations.

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Magalu falls 22% in one day

After publishing a much worse result than the market projected – and without giving very good prospects for the future – Magazine Luiza shares fell 22% this Tuesday.

The retailer’s shares were among those that rose the most in the year until the day before yesterday, in advance of almost 60%, with investors considering the company among those who could take advantage of the Americanas crisis.

• After the fall, the accumulated high in 2023 is 30%.

in numbers: the company disclosed on Monday a loss of BRL 391.2 million in the first quarter, it worsened significantly in relation to the same period of the previous year (R$ 161.3 million).

What does it explain? Magalu’s performance was affected by two main factors:

Financial expenses: High interest rates increased the retailer’s financing expenses, mainly in the form of prepayment of credit card receivables – the company pays a fee to receive cash on credit sales.

Return from Difal: the tax created in 2015 to balance the receipt of ICMS between the states involved in the transport of goods started to take effect this year.

• The impact of the tax on the retailer began to appear in the first quarter, when it withheld part of the pass-through to prices.

• For the rest of the year, the industry’s ability to pass on the tax to goods without scaring off consumers will be tested.

The CEO of Magalu, Frederico Trajano, said in a conference call that the company’s market share grew by 6 percentage points and that there was an increase in sales in all the company’s channels – possible effects of the Americanas case.

More about swings

Results for the 1st quarter show that large banks remain conservative in the offer of credit, and the combined profit of banks drops 6% thanks to negative results from Bradesco and Santander.

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High interest; risks, too

The package announced on Sunday (14) by the government of Argentina to try to stabilize the peso against the dollar includes raising the local interest rate by 6 percentage points, reaching 97% per year.

For those who think While the opportunity to almost double your net worth in one year by investing in Argentine bonds might make sense, it’s best to be very careful.

Understand the weight crisis: currency devaluation is the result of erratic economic policies, which led the country to go through nine major crises in a period of 40 years, as shown by the Sheet recently.

Thinking about investing? It’s best to think carefully and remember one of the market’s maxims: high-return potentials come with high risks.

• In this case, the risk is that the Argentine government will default on its debt, just as it did in 2020, when it failed to pay interest of US$ 500 million.

• Another problem is investing in bonds with the local currency, which loses a lot of value. As much as the profitability is attractive, when converting the currency, the return can turn to dust.

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How much does the cost Brazil cost?

A study put at the tip of the pencil how much the country loses with the tangle of structural, bureaucratic and economic difficulties that affect the development of business here.

The result: BRL 1.7 trillion per year, or 19.5% of GDP.

• The calculation of the Brazil cost was disclosed by MBC (Movimento Brasil Competitivo) in partnership with the Ministry of Development, Industry, Commerce and Services.

Understand: this value represents the additional expense that companies have to produce in the country, compared to the average costs in OECD members.

numbers that explain the Brazil cost in practice:

• 62.5 days is the time spent by companies in the country to pay taxes. The OECD average is six days.

• 80% of the Brazil cost it is in 6 of the 12 axes analyzed: financing a business, employing human capital, having infrastructure, regulatory legal environment, integration of global production chains and honoring taxes.