Cost-cutting provides breathing space in Q3
Brazilian companies have once again implemented cost-cutting measures, resulting in a slight improvement in their third-quarter operational performance, despite a decline in sales revenues during the period.According to a survey by Valor Data, which examined 407 non-financial companies with publicly available data, total sales for the quarter amounted to R$883 billion, roughly equivalent to $176 billion as of the end of September. This represented a 1.7% decrease compared to the same period the previous year. However, the notable factor in this equation was the reduction in costs, which saw a 2.4% decrease, translating to savings of approximately R$16.8 billion.Furthermore, general, administrative, and sales operating expenses also witnessed a decline of 1.8%, amounting to R$105.8 billion.This concerted effort resulted in a 3.1% year-on-year increase in earnings before interest payments and exchange rate variations for this group of companies, reaching R$107.1 billion, equivalent to 12.1% of revenue. This represents a 0.6 percentage point increase in the operating margin when compared to the same period in 2022.Despite this modest gain, it’s important to note that the basis for comparison was quite weak. In the third quarter of 2022, during a period marked by higher inflation and interest rates, where costs outpaced revenue, operating profit had fallen by 14% compared to 2021.It’s worth mentioning that the figures provided exclude Petrobras and Vale due to their substantial size, which could potentially distort the overall analysis. Among the 407 companies in the sample, 268 have publicly traded shares, boasting a combined market capitalization close to R$2.5 trillion. In contrast, the oil and mining giants, Petrobras and Vale, the two largest companies listed on B3, account for a combined worth of approximately R$808 billion, representing 24% of the total value within the sample.While the operational side performed admirably, the financial aspect of the equation left room for improvement. The sample saw a substantial 35% increase in net foreign exchange and interest expenses. Consequently, this led to a 4.2% reduction in net profit during the period, bringing it down to R$44.3 billion."Surprisingly, the operating results have been impressive, as companies restrained sales and bolstered their profit margins through stringent cost control," said Wesley Barnabé, research manager at BB Investimentos.Ricardo Peretti, a stock strategist at...
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