Brazilian market set to shine in Q3 as exporters feel commodity slump

In the third quarter, companies tied to Brazil’s domestic economy are expected to stand out, benefiting once again from heated activity to drive revenue and profit growth.

Exporters, meanwhile, are likely to feel the effects of falling commodity prices between July and September, though the Brazilian real’s depreciation against the U.S. dollar may provide some relief.

Bank of America estimates that companies on Brazil’s benchmark stock index Ibovespa, including those in the financial sector, will see a 10% increase in revenue year-on-year for the third quarter, with EBITDA rising 6% and earnings per share up 12%.

Excluding basic materials and energy companies, focusing solely on domestic sector firms, revenue grows 9% year-on-year, while EBITDA jumps 20% and profit increases 23% over the same period. This will mark the fifth consecutive quarter of profit expansion for these companies.

“We continue to see recovery in consumer-related sectors, primarily supported by a weaker annual comparison base,” wrote BofA analysts led by David Beker. Apparel retailers, health sector companies, and telecommunications firms are expected to stand out.

The first company operating in the domestic sector to release its quarterly results was Multiplan, which posted a 6% profit increase to R$279.6 million, with revenue up 7.6% to R$545.2 million, driven by strong performance from retailers in its shopping malls.

Online brokerage XP noted that third-quarter results will reflect a reduction in risks and an improved macroeconomic outlook abroad. Generally, market consensus expects EBITDA and revenue growth for the period, with a slight contraction in earnings per share.

“In a broader timeframe, the domestic macroeconomic scenario will likely remain challenging, with potential new interest rate hikes and a slowdown in economic activity,” said analysts Fernando Ferreira, Jennie Li, and Felipe Veiga.

Since July, according to XP, earnings-per-share estimates have been revised down by 9.2% for this year, while projections for 2025 have remained practically stable. Market estimates for the third quarter have also been revised down by 6.3% since July.

BTG Pactual analysts Luiz Guanais, Gabriel Disselli, and Pedro Lima believe that cost-cutting efforts by retail companies, along with a more rational pricing environment and gains from operational leverage, will yield positive results. They estimate the retail industry’s revenue will grow 7% to R$100.5 billion, with gross profit rising 10% to R$26.9 billion. Companies catering to middle- and lower-income consumers are expected to outperform. The bank noted the big question is how long retail recovery can be sustained amid high interest rates.

In Itaú BBA’s view, the season should be slightly positive, with revenue, EBITDA, and profit growth. Apparel retail, healthcare, and construction companies are expected to be the highlights. Meanwhile, among commodity exporters, results are likely to decelerate due to negative price dynamics during the period.

Itaú BBA’s analysts Daniel Gewehr, Matheus Marques, and Victor Cunha observed that recent market revisions for the quarter were led by commodity companies. Projections for 2025 remain stable despite the high-interest rate environment.

Suzano, which reported its figures on Thursday (24), reversed a loss from a year ago, achieving a profit of R$4.2 billion, mainly driven by a 40% increase in the average pulp price in reais (23% in U.S. dollars). The real’s decline against the U.S. currency also contributed. Pulp net revenue rose 48%, spurred by higher prices, the stronger dollar against the real, and a 6% increase in sales volume.

The FX rate rose 13.5% year-on-year in the third quarter on average, reaching R$5.54 per dollar, as Brazil’s fiscal risks heightened market tensions.

The exchange rate advantage in converting revenue to the local currency can be offset when companies have foreign currency debt, which also adjusts to the higher dollar in financial expenses. This was not the case for Suzano, but it remains a trend to monitor.

Vale, another major exporter, saw a 15% drop in profit to $2.41 billion, impacted by lower iron ore prices and higher freight costs. These effects were partially offset by the real’s depreciation, reduced costs and expenses, and higher sales volumes.

By Felipe Laurence

Source: Valor International

Sharing is caring!