Brazil’s Petrobras Confirms New Pre-Salt Oil Discovery

Brazilian oil company Petroleo Brasileiro SA (PBR), or Petrobras, confirmed late Tuesday the discovery of a new hydrocarbon accumulation in the pre-salt layer of the southern Campos Basin.

The discovery was made in the Pao de Acucar prospect, about 195 kilometers offshore Rio de Janeiro state at a water depth of 2,800 meters.

The company didn’t provide an estimated volume for its new discovery.

Repsol Sinopec is the operator of the exploration consortium at the prospect, with a 35% stake. Norwegian oil company Statoil ASA (STO) also holds 35%, while Petrobras holds 30%. Repsol Sinopec is an alliance between Spain’s Repsol YPF SA (REP.MC) and China’s Sinopec.

“The consortium will conduct additional analyses in the area using data obtained from this well to confirm the extension and volume of the discovery. The Pao de Acucar well confirms the huge potential of block BM-C-33, where the prospects of Seat and Gavea were discovered,” Petrobras said.

Source: The Wall Street Journal

Brazil Sugar Exports Seen More Profitable Than Domestic Sales

Exports of sugar from Brazil, the world’s largest producer of the sweetener, are more profitable than domestic sales for the first time since October, according to Cepea, a University of Sao Paulo research group.

Sugar exports were on average 4.2 percent more attractive than sales in the domestic market last week, Heloisa Lee Burnquist, an analyst at Cepea, wrote in a report yesterday. That was the first time shipment profits beat the internal price since the week of Oct. 17 to 21, she said.

“Quotes in the international market have been pushed up by speculation regarding a possible decrease of sugar supply in the short-run,” Burnquist wrote. “The market is still facing the consequences of lower Brazilian production.”

Sugar cane output in Brazil’s Center-South, the nation’s main producing region, fell for the first time in a decade in the current 2011-12 season. Output through Feb. 1 totaled 493.5 million metric tons, down 11 percent from a year earlier, according to industry group Unica. Most of the harvest has already been completed, Unica said on Feb. 14.

Sugar supply may be 20 percent lower than at the same period last year, Burnquist said in the report, citing unidentified traders. Raw sugar traded on ICE Futures U.S. in New York has climbed 8 percent so far this month.

Further gains may be capped as Brazilian producers now have more incentive to export. Raw sugar for March delivery was 0.97 cent a pound more expensive than May-delivered sweetener by 4:44 a.m. in New York, down from this year’s high of 1.46 cents a pound on Feb. 23, data on Bloomberg show. The March raw sugar futures contract expires tomorrow on ICE Futures U.S.

“Rumours that Brazil Center-South mills are releasing stocked sugar for export previously intended for the domestic market has dampened the near March-May somewhat,” Nick Penney, a trader at broker Sucden Financial Ltd. in London, wrote in a report e-mailed yesterday.

Source: Bloomberg

Statoil Confirms High-impact Discovery Offshore Brazil

Norwegian oil company Statoil ASA (STO) confirmed Monday it has made a high-impact discovery offshore Brazil, together with operator Repsol Sinopec and partner Petrobras (PBR).

The discovery was made in the Pao de Acucar prospect, about 195 kilometers offshore Rio de Janeiro State at a water depth of 2,800 meters.

A test flowed 5,000 barrels a day of light oil and 28.5 million cubic feet a day of natural gas.

This is the third discovery in the BM-C-33 block, and “confirms the area’s high potential,” Statoil said in a statement.

Repsol Sinopec is the operator of the exploration consortium with a 35% stake. Statoil holds a share of 35% and Petrobras holds 30%. Repsol Sinopec is a alliance between Spain’s Repsol YPF SA (REP.MC) and China’s Sinopec (SHI).

Statoil said this is its sixth high-impact discovery in 12 months. The others are Havis, Skrugard and Johan Sverdrup in Norway, Peregrino South in Brazil and Zafarani in Tanzania.

Source: The Wall Street Journal

Brazil’s Pao de Acucar profit beats, margins up

Grupo Pao de Acucar , Brazil’s biggest diversified retailer, posted a 43 percent jump in fourth-quarter profit thanks to surging revenue and solid cost controls.

The Sao Paulo-based company reported net income of 361 million reais ($209 million) in a Thursday securities filing, beating expectations of a 313 million reais profit in a Reuters survey.

Pao de Acucar said its growing scale helped improve negotiations with suppliers and the elimination of bakery and meat sections from some stores helped control costs in the face of rising wages. Both adjustments helped to boost profitability more than most analysts had forecast.

Earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, rose 51 percent to 1.096 billion reais, beating expectations of a 30 percent increase.

EBITDA as a share of revenue, a measure of profitability known as the EBITDA margin, gained 1.6 percentage points to 8.2 percent.

Source: Reuters

Brazil Mobile Phone Co TIM Bears Fruits From Turnaround

Brazilian mobile phone company TIM Participacoes SA (TIMP3.BR) is now producing the results from its three-year turnaround, and expects to maintain strong growth ahead given huge market potential, according to the company’s top executive.

Having ground to a halt in 2009, with zero revenue growth, TIM is now posting double-digit expansion. For 2011, TIM reported a net profit of BRL1.3 billion, up 66% from 2010, while net revenues were up 18% at BRL17.1 billion.

The reversal of TIM’s fortune is down to a change of strategy back in 2009, following a management shake-up at the Italian parent company, Telecom Italia SpA (TIT.MI), which had its own financial worries.

In Brazil, the focus became simplicity, offering flat rates for calls, rather than charging per minute–a move which shook up the Brazilian marketplace, cutting through the confusing array of promotions and plans which had been the norm. Widely questioned at the time, it’s now paying off, and the company is well-placed to tap the huge pent-up demand for voice and data services which still exists in Brazil, TIM chief executive Luca Luciani said in an interview.

“Brazilian gross domestic product per capita is one-quarter of what it is in the U.S. What companies have to do is to adapt what we’re offering to the reality of the country, to make the business explode,” Luciani said.

TIM has recouped its second place standing in the Brazilian mobile phone market, with 64 million subscribers, overtaking Claro, of Mexico’s America Movil SA (AMX), in mid-2011. It still lags Vivo SA (VIVT4.BR, VIV), which ended the year with nearly 72 million customers. TIM’s customers are now talking much more; the company handled 90 billion minutes in 2011, up from 40 billion minutes in 2009, Luciani said.

According to Luciani, TIM stands to benefit from the huge changes which lie ahead because it doesn’t have the traditional fixed-line business. There is going to be a “brutal” transformation, according to the executive; by 2016, mobile will account for 60% of the market, and 40% will be fixed-line, a straight switch from the current situation. TIM’s main rivals with fixed-line operations will struggle to sacrifice fixed-line revenues for mobile growth, Luciani said.

For mobile operators, voice services remain an important part of revenues, offering steady, single-digit growth from a large base. Data, on the other hand, offers strong growth; the proportion of TIM’s customers with data-enabled handsets jumped to 27% at the end of December, from 10% at the end of 2010.

“What’s been true in the U.S. and Europe for three years, has only been here for a few months,” Luciani said.

TIM has made two significant acquisitions in recent years that both help reduce costs and give the company heft. It bought long-distance carrier Intelig in 2009, providing a national backbone network, and last year it bought AES Atimus, which operates some 5,500 kilometers of fiber optic cable in the major cities of Sao Paulo and Rio de Janeiro. TIM said it has identified BRL4.8 billion in cost savings from the purchase of AES Atimus–since renamed TIM Fiber–and these should start to show up in the second quarter of this year, Luciani said.

“We bought that fiber to feed the mobile antennas, but at the same time it offers almost for free, things that are interesting,” Luciani said.

One major development for 2012 stemming from the purchase of TIM Fiber is the plan to set up 10,000 WiFi hotspots across the country, to allow mobile customers to access the Internet at much higher speeds, but at a far lower cost than installing traditional mobile network antennas.

Meanwhile, Luciani said another big move that will happen at some point will be the launch of an unlimited international roaming service, both for voice and data, Luciani said. The executive didn’t indicate when that was likely to happen.

One of the big issues facing the market as a whole this year is the governments’ plan to auction so-called 4G licenses, the next technological leap forward which has already been rolled out in more developed markets. TIM has questioned the need to move quickly to 4G in Brazil, and Luciani said that it’s still “too early to say” what will happen. He pointed out that existing 3G technology is still out of the reach of most Brazilians, and will only take off once handsets cost less than BRL300, versus the current range of BRL1,000 to BRL2,000.

TIM streamlined its shareholding structure in 2011, and can handle major planned investments from cash flow, Luciani said. The company invested BRL3 billion in 2011, plus BRL1.6 billion to buy AES Atimus. Some analysts have suggested that the company could borrow more, but Luciani said that given the volatility in global financial markets, he prefers a “conservative” approach, and that the emphasis now is on organic growth, without more acquisitions. The company is proposing to increase its dividend payments, to BRL533 million this year from BRL204 million in 2009.

“We are not a dividend yield story, we are a growth story; but it’s once again aligning the interests of shareholders,” Luciani said. “Given that the perspective for the business is positive, because we can grow, our dividend will grow proportionally.”

Investors took their money out of Brazilian equities in 2011, amid the global financial turmoil, Luciani said; the Ibovespa index of stocks on the Sao Paulo exchange declined 18% last year. Companies considered as “defensive” — those less likely to be affected by a downturn — did very well, with TIM and rival Vivo among the best performers last year. Luciani said that as global sentiment improves, Brazil stands to benefit, and companies with transparent shareholder structures will benefit most.

“I believe liquidity will return. There will be another cycle of expansion of investments in Brazil, and I believe that to be ready with a simplified capital structure that can attract the liquidity in the world is an important advantage,” Luciani said.

Source: The Wall Street Journal

Why Is Your Boss Moving to Brazil?

When Isabel Moises moved from Lisbon to São Paulo last year to take an executive position with beer company Heineken, she was following the same path taken five centuries ago by the Portuguese explorers who discovered Brazil. And these days, if her e-mail box is any indication, chances are Moises won’t be the last. With Europe’s economies stagnant — Portugal needed a massive bailout last year — more and more of its corporate talent is making the trans-Atlantic voyage to revive their flagging careers in Brazil, where companies are growing at a torrid pace. Says Moises, 44, a human resources vice president for Heineken’s Brazil operation, “Every week I get people asking me how they can get a job in Brazil, what’s the best way to send their resume, where there are opportunities.”

One might ask, “Where aren’t there opportunities in South America’s biggest nation?” Although Brazil’s economy is expected to grow less robustly this year, it should still outpace the troubled economies of the U.S. and Europe. It was one of the few countries to emerge from the global recession unscathed — it recently passed the UK as the world’s sixth largest economy — and some 30 million people over the past decade have risen from poverty into the consuming classes. In fact, some estimates have Brazil creating almost 20 local-currency millionaires a day.

At a time when oil and gas industries are booming in the Americas, Brazil’s are booming loudest, thanks to massive deep-ocean finds. And although Brazil’s big cash cow is its commodities exports, domestic firms like jet-maker Embraer have laid a manufacturing base unusual for most Latin American countries, while cities like Recife in the relatively undeveloped Northeast are reinventing themselves as high-tech corridors for IT and software. The transport, tourism and construction sectors, as Brazil readies to host the 2014 soccer World Cup and 2016 Summer Olympics in Rio de Janeiro, are also seeing massive investment.

All that has created a sharp demand, especially given Brazil’s still middling education system, its lack of qualified engineers and technicians, and its dearth of experienced managers. Headhunters in São Paulo, the southern hemisphere’s most populous city, say foreign executives used to come to Brazil, if they came at all, to get a few years of managerial experience they could parlay into a move somewhere more important. But now Brazil is the destination — especially now that salaries exceed what’s on offer in the developed world. A recent study by the Dasein Executive Search firm found that CEOs in São Paulo today earn an average annual salary of $620,000 (€455,000), more than their counterparts in New York ($574,00/€422,000), London ($550,000/€404,400) or Hong Kong ($242,000/€178,000).

One statistic illustrating the change came late last year when the government announced that the number of work visas issued to foreigners rose 50% in the first half of 2011. For the first time in 20 years, there are more foreigners living in Brazil than there are Brazilians living overseas. “The scarcer that high performance executives with a global vision are,” says Dasein President Adriana Prates, “the more power they have in negotiating salaries.” Moises would agree: “The salary in Brazil for the same position/executive job is 30% higher when compared with Portugal.” Brazil may not yet be China, but it’s attractive enough to be a manager magnet. “Today, you need to have emerging-market experience if you want to advance your career,” says Nico Riggio, 37, an Italian and Columbia University grad who left his post as vice president for consumer electronics at Phillips in New Yorklast year to help run a U.S.-Brazilian beverage company, AMA Waters, in São Paulo. “It’s like having an MBA 10 or 15 years ago.” (Riggio didn’t want to discuss his Brazilian salary for security reasons.)

Peter Gallagher also left New York for São Paulo — and has climbed the corporate ladder since he arrived three years ago far more quickly than he would have in Manhattan, he says. People there questioned his sanity when he decided to head below the equator; but at 38, Gallagher is a director in the Latin America office for U.S. eyecare firm Bausch + Lomb. “The degree of responsibility is much more,” he says, and he’s “certainly not making less” money than he did in the U.S. “I could see the market potential, and so to me it was a no-brainer.” Like Riggio, Gallagher also knows the experience will be golden: in his current position, he says, “You have a perspective of what headquarters is thinking, but you also understand the operational challenges and rhythm of day-to-day execution.”

New arrivals like Gallagher don’t deny Brazil faces significant problems, such as corruption, high taxes and bureaucratic red tape that could tie Houdini in knots. And the decade-long boom is slowing as concerns over inflation and exorbitant prices loom larger. But the stability President Dilma Rousseff has encouraged — a welcome change from the boom-and-bust cycles of Brazil’s past — allows business decision-makers to remain sanguine. “There is a great desire to consume here, and that isn’t the case in Europe, where people are saving rather than spending,” says Portuguese national Filipe Tendeiro, Brazil manager for the Paris-based luxury leathergoods company Longchamp. (Brazil’s luxury goods market was expected to grow 33% last year to $12 billion, thanks in no small part to a roster of more than 155,000 millionaires, the world’s 11th largest.)

While transplants like Moises have an advantage because they already speak Portuguese, she also points to improvements like Brazil’s falling murder rate, which has given her the security she didn’t feel when she turned down her first chance to work in the country a decade ago. Others note the warm climate, welcoming people and a culture that knows how to mix business with pleasure. All that and a great paycheck too? “It’s an employee’s market,” says Denys Monteiro, a managing partner at Fesa, Brazil’s largest executive search firm. Or as Riggio might tell executives from London to Los Angeles: Come on in, the Amazon waters are tudo bem — very fine.

Source: Time