Profits of non-financial companies on Brazil’sB3 exchange fall 39.5% in the 3rd quarter

The profit on Brazil’s B3 exchange of publicly traded non-financial companies (that is, not counting banks and companies with high profits) fell 39.5% in the 3rd quarter of this year compared to the same period in 2021.

It went from R$ 54.1 (US$10) billion to R$ 32.7 (US$6) billion.

TradeMap conducted the survey. The analysis considers values in the accounting standard without extraordinary adjustments or inflation correction.

In the period, the companies’ revenue reached R$ 847.5 billion. It represents an increase of 16.5% in the yearly comparison.

On the other hand, the companies had more expenses. The cost of goods sold rose 217%.

Sergio Castro, the CNPI analyst at TradeMap, cites two reasons for the worsening profitability of the companies:

• higher production costs; and
• high level of debt.

“The higher inflation in the 12-month accumulated period caused the production cost to grow at a higher rate than revenues, even with deflation in the third quarter,” he says.

Another point is the higher leverage of companies, which had to raise more debt and burn part of their cash, either to make new investments, pay part of the debts they already had, or even to be able to postpone them.

“The higher volume of debt, added to the high-interest rate of 13.75%, is reflected in the increase of the company’s financial expenses, which, in turn, erodes profits,” said Castro.

The annualized return on equity (ROE) in Q3 2022 was 13.2%, a reduction of 5 percentage points compared to the same period in 2021.

The electric power sector, which includes a total of 36 companies, was the one that presented the best performance, with a profit of R$9.68 billion from July to September this year.

METHODOLOGY

For the survey, 335 companies were considered, all listed on B3 and with financial statements presented in the 3rd quarter of 2021 and 2022, respectively.

The sample also included companies that went public in 2021, with 2nd quarter balance sheets available at Brazil’s Securities and Exchange Commission.

The study did not consider the results of Petrobras, Vale, Suzano, and Braskem, companies that posted historically high profits in the last period, and that, if they were considered, would brinsignificantat distortions to the overall analysis.

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