Increase in revenues, reduction of debts and record profits. Facts like these were part of the balance sheets of many open capital Brazilian companies during the first semester in 2005.

According to a study made by the consulting company Economática, the added earnings of 107 companies, which up to the end of last week had already presented their semester statements, increased by 11.2% and the profits, by 63%.

Amongst the companies that had the greatest profits in the semester are mining companies, steelworks, telephone services providers, electric energy suppliers, cellulose and paper factories and petrochemicals, among others. The banks were left out of the study, as was the state owned oil giant Petrobras.

According to specialists, in various situations, one of the factors that contributed the most for the companies' increase in revenues was the increase in exports and especially in the price of the goods sold in the international market.

These factors have has compensated the losses due to the strong appreciation of the Brazilian real in relation to the American dollar. The North American currency's value dropped 24.3% between the 30th of June last year and 30th of June 2005.

Although Petrobras is not part of the study, the company's performance serves as an example of this phenomenon. In the first semester the company had a net income of 62.256 billion reaos (US$ 26.436 billion, by today's exchange rate), 22% more than in the same period last year.

The profit, in its turn, increased by 40% and passed 9.9 billion reais (US$ 4.233 billion), a historic record. A report released this Monday, August 15, the company points out as one of the main factors that influenced the numbers the "increase in exports, reflex of higher oil prices in the international market and of the volumes shipped."

This was also the case of the mining company Vale do Rio Doce, which had revenues of 17.1 billion reais (US$ 7.261 billion) and a net profit of more than 5.094 billion reais (US$ 2.163 billion) against R$ 2.637 billion (US$ 1.120 billion) in the first semester last year.

The company's profit was greater than the numbers of the two greatest banks in Brazil, Bradesco and Itaú which also had excellent results, added together. The company points out a recovery in the commodities' prices, especially iron ore, one of the main performance factors.

Another example is Gerdau, group in the long steel sector. The group's added revenues, in Brazil and abroad, was of 13.4 billion reais (US$ 5.690, billion), or 18.6% greater than that registered in the first semester in 2004, and the profit registered was of 1.7 billion reais (US$ 721,9 million), against 1.3 billion reais (US$ 552.0 million) for the first six months in 2004.

The increase in the average value of the goods was also pointed out as one of the main reasons for the group's performance, as well as the increase in the volume exported.

"World economy is going through a good moment, which pulls exports up, both in quantities, as in prices," said the economist Armando Castelar Pinheiro, from the Institute of Applied Economic Research (Ipea).

"The effect of the real appreciation was compensated by better international prices," added the executive director at the Institute for Studies in aid of Industrial Development (Iedi), Julio Sérgio Gomes de Almeida.

China's appetite for raw materials and inputs is seen as one of the pivots of the improvement in world economy.

Debts Reduced

Although Brazilian entrepreneurs in the exporting sectors have been complaining about the real appreciation, it has benefited the Brazilian companies indebted in foreign currency. In other words, the depreciation of the dollar contributed to reduce the companies' debts in national currency.

"The financial gain was very high. The companies' profits was powered due to the reduction in their foreign debts expressed in national currency (real)," said the coordinator at Economática for Latin America, Einar Rivero. According to the consulting group's study, the companies' debts dropped in average almost 21% in the period.

The steelworks group Usiminas, for example, which had profit of 1.8 billion reais (US$ 764.4 million), saw their net debt drop from 6 billion reais (US$ 2.548 billion) in the first semester in 2004, to 2.4 billion reais (US$ 1.019 billion) in the same period this year.

The company highlighted in their statements that the real appreciation had a "positive impact" on their debt reduction. "The real appreciation had a very strong impact on the liabilities of companies that obtained resources abroad, the gain for them was great," remarked Castelar.

The same happened to Petrobras. "In the consolidated balance sheet, the 12% appreciation in the real in relation to the dollar, on the second quarter of 2005, generated a gain on the net monetary liabilities, bound to dollars, of the controlled companies based in Brazil," says the report released by the company.

Services

But not only the exporting companies had good results in the period. Amongst the most lucrative companies in Brazil are those in the services sector, such as the Energetic Company of Minas Gerais (Cemig), which had a profit of 1.041 billion reais (US$ 442.1 million), and telephone services supplier Telefonica/Telesp, whose profits reached more than 1.1 billion reais (US$ 467.1 million).

In Rivero's evaluation, as well as foreign debt reduction, these companies benefited from the increase in tariffs charged over telephone services and supplying of electric energy.

Other companies in these sectors also appear amongst the most lucrative, such as the São Paulo state light and energy company (CPFL) and telecommunications Telemar Norte Leste.

For Castelar, the open companies' good performance was also influenced by the internal market. This opinion, however, is not unanimous amongst the specialists. The Ipea economist says that Brazil's economy general performance was good in 2004 and this was reflected in the first semester of this year.

"This was reflected in the automobile industry, for example," he said. Some 800,128 new vehicles were sold in the country in the first semester, an increase in 10.7% in comparison to the same period last year.

Almeida from Iedi, in turn, states that the internal market "didn't improve, but also didn't get any worse."

Profitability

As well as the increase in revenues and profits and the debt reductions, other positive figures have been identified in the balance sheets.

According to the study by Economática, the average profitability over the researched companies' capital went from 14.2%, to 22.1% in the period of 12 months up until the 30th of June.

"It is a very expressive number, very significant especially for the industrial companies," remarked Rivero.

He also highlighted the variation of the operating profit over the companies' debts, which went from 20.4% to 29.5% in comparison between the first semester this year and the same period in 2004. This, according to Rivero, shows the increase in the companies' paying capacity.

"This means that for every 100 reais in debt the companies generate 29 reais in profit, which shows a truly high payment capacity, solvency capacity, and the possibility of obtaining resources at lower rates," he declared. For him, up until the end of the year, the percentage may increase to 60%.

In fact, with the figures presented in the first semester, the economists are optimistic in relation to the second. "The picture should remain the same," believes Rivero.

For Castelar, not only world economy, but the Brazilian should also present good results in the period. This, in his evaluation, should take place in a quicker pace if the base interest rate is reduced. "I would say that there is a very favorable picture for the companies," added Almeida.

This article appeared originally in ANBA - www.anba.com.br.

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