Privatization of Correios Should Only Occur in 2022

RIO DE JANEIRO, BRAZIL – The studies on the privatization model of the Correios (Brazil Postal Service) should only be completed by late next year, says the president of the state-owned company, Floriano Peixoto.

As a result, Correios, the largest state-owned service sector in the country with 95,000 employees, is expected to be auctioned in 2022. The studies involve estimating the state-owned company’s market value, which should take into account the impact of the last strike, which ran for 35 days. Below are the main excerpts from the interview.

Q: When should the consulting firm hired by the BNDES (National Bank for Economic and Social Development) to conduct the privatization modeling studies for the Correios complete its analysis, including the company’s valuation?

What we have in progress is a study conducted by BNDES and the Investment Partnership Program Special Secretariat to assess privatization scenarios for the postal sector. According to the established planning, this study will extend until late 2021, with established goals that must be reached to define what is most appropriate for the company.

Q: Have you personally followed these studies and taken part in discussions with the consultancy firm regarding the company’s valuation process and privatization model? How often have the meetings taken place?

Yes, I have followed the study’s progress, understanding the company’s role as the study’s target. Correios has contributed to the Inter-Ministerial Committee comprising the Investment Partnership Program Special Secretariat, BNDES, the Ministry of the Economy and the Ministry of Communications, providing data and following the discussions with the Postar Consortium, which is at the head of the consulting firm.

Q: The company’s financial statements are central to preparing the valuation. Can you advance how much was the Correios’ net profit, revenue, loss and EBITDA (earnings before interest, taxes, depreciation, and amortization) in the first semester this year, compared to the same period last year?

These figures are still to be duly audited and are waiting to be published.

Q: In 2019, company’s net income amounted to R$102.1 million, 36 percent less than in 2018. Why did the profit drop? And what is the expectation for this year?

The negative difference from the accounting standpoint is only due to liabilities inherited from past managements. We can state that the company had positive and optimistic results, attributed in large part to the strategic measures implemented by the current management in order to ensure the company’s financial sustainability. These positive results are expected to continue in 2020, with the rationalization of costs with current expenses.

Q: Speaking of liabilities, the independent auditor of the 2019 balance sheet pointed out that it was unable to confirm the exact figure. Correios may have over R$6.8 billion in labor liabilities and amounts owed the Postalis pension fund. Were you able to reach an estimate of how much these liabilities are in fact?

The independent auditor’s indication concerns the legal risk related to labor lawsuits that the Correios’ employees have filed against the company, alleging bad management in Postalis. The company considers that this risk is low, since the obligations related to the complementary welfare and health plans are estimated through equal parity between the parties.

Q: Could the latest strike, which ran for 35 days, have an impact on the Correios’ valuation and on this year’s operational results? What was the company’s revenue, loss and profit during the strike’s 35 days?

Both the valuation and the financial results will be better quantified over the next months.

Source: Exame