Here are the effects of BRL’s recent swings on some companies and sectors:
Petrobras: the company expects itsthird-quarter results to suffer as the exchange rate increasesthe cost of its dollar debts, the company’s chief financialofficer told Reuters last month. The company said in the second quarter it was carrying 68million reais in debt, most of it in dollars, and that it was50 percent hedged.
Utility Companies: Analysts say Brazililian electrical utilities alsoshoulder a heavy foreign debt load, which may stand in the wayof hefty dividends that attract investors in market downturns. CESP is especially vulnerableto currency swings as 30 percent of its debt is in dollars. Cesp does not use financial derivatives to offset currencyrisks, the company said in a July filing. Cesp declined to makeany further comment.
Meat producer Marfrig Alimentos SA and Hypermarcas, the largest Brazilian maker of disposable consumer goods, also have significant unhedged debts in dollars, according to Daniela Bretthauer, head of equity research for Raymond James in Brazil. Bretthauer warned clients in a Sunday note that bothcompanies could see third-quarter losses rather than profitsbecause of higher debt-servicing costs.
Other companies will see a boost to foreign revenueswithout the greater weight of foreign debt. Bretthauer of Raymond James said one such winner could beMultiplus, airline TAM‘s separately listed loyaltyprogram, as two-thirds of its revenues are dollar-linked. Parent company TAM is less fortunate,however, as a weaker real drives up its debt-servicing costs. More than 85 percent of TAM’s debt was in foreign currencyin the second quarter, when the company credited a strongerreal for its lighter debt load and stronger net profit.