Espresso for April 29th
QUOTE OF THE DAY
“Nobody touches the food minister… the revolution will not be censured by anyone, much less an immoral National Assembly,” Venezuelan President Nicolas Maduro over Congress sacking food minister.
WHAT MARKETS ARE TALKING ABOUT
BRAZILIAN BANKS’ RALLY COULD BE ENDING
Brazilian banks reported sluggish earnings. Stocks have rallied recently on increasing odds of an impeachment for President Dilma Rousseff. ITAU and BRADESCO ADRs have given 50% year-to-date return as of today, outperforming SANTANDER BRASIL and the IBOVESPA by about 20pps. Still, banks’ valuations seem stretched given both macro and the sector’s fundamentals, which have not yet shown signs of touching rock bottom. As BCB’s credit figures for February show a struggling industry, particularly in the Individuals and Corporates segments.
VENEZUELA’S CONGRESS ORDERS FOOD MINISTER SACKED
Venezuela’s opposition-dominated Congress on ordered the dismissal of Food Minister Rodolfo Marco over shortages of staple goods. The opposition majority used a constitutional censure vote to order that Maduro dismiss Marco. Legislators had previously summoned him for questioning over the shortages. According to opposition deputy Carlos Paparoni, 3 million citizens eat less than twice a day, and the majority of them do not eat dairy, meat or eggs. The ruling Socialist Party may simply ignore the censure vote or seek to have it shot down by the Supreme Court, which has routinely sided with Maduro in disputes with Congress since the opposition’s legislative elections victory in December.
MEXICO’S EARNINGS SEASON CONTINUES
MEXCHEM: Top line decreased 12% YoY (-4% excluding FX). The strengthening USD, the decline in PVC prices, and weaker demand for metallurgic and acid grade fluorspar all contributed to the decline in this gauge. This was partially mitigated by the continued solid performance of the vinyl and fluent divisions in Europe. EBITDA increased 1% YOY (+16% excluding FX), while EBITDA margins expanded 214 basis points from 13.7% to 15.9%. Improved profitability is attributable to an expansion in Vinyl’s EBITDA, lower feedstock prices, and strong performance in Vestolit.
AMX disappointed and fell 11% after earnings release. The company does not get access to pay TV in Mexico. Margin expansion in Brazil, Argentinian block and Europe insufficient to offset dilution in Mexico and Colombia. Cash flows should favor debt repayment rather than shareholder distribution (increased buybacks or extraordinary dividends). Market participants are worried that AMX is cutting prices to prevent market share loss.
CARLOS SLIM NOW THE WORLD’S 5TH-RICHEST PERSON
Jeff Bezos has toppled Mexico’s Carlos Slim as the world’s fourth-richest person. The net worth of 52-year-old Amazon’s founder rose to $60 billion as the online retailer’s shares rose 13% in after hours. Amazon posted first-quarter sales and earnings that topped analysts’ estimates and pushed shares as high as $683 from a close of $602. Meanwhile, Carlos Slim’s fortune fell $3.4 billion to $55 billion after America Movil SAB plunged the most in 8 years after saying profit margins in Mexico continued to shrink. Bezos passed Slim for the first time in November 2015 and ceded the position to him again in February. Game on.