Brazil firms enter ‘do not fire’ pact as virus roils economy

-A +A

SAO PAULO (April 6): Brazilian companies from retailers to homebuilders and banks pledged to not fire employees during the crisis, while the industry continued to adjust operations, as politicians discuss when social isolation measures will ease.

The Health Ministry estimates social isolation will be relaxed by April 13, according to Folha newspaper, while lender Itau expects gradual reopening from April 20. But Sao Paulo, the richest and hardest hit state, may extend measures, local media reported.

The latest data from the Health Ministry shows coronavirus cases rose to 11,130 with 486 deaths.

Here’s a summary of the latest measures taken by Brazilian companies:

April 4, 5 and 6: Gerdau halts operations; “do not fire” movement
Steelmaker Gerdau will temporarily shut down blast furnace 2 in Ouro Branco and halt activities in several electric melt shops and long steel rolling mills across the country. Tupy will suspend all its operations in Mexico until April 30.

Brazilian companies from fuel distributor BR Distribuidora to brokerage XP Investimentos and lender Itau Unibanco pledged to not fire employees during the Covid-19 crisis.

The National Monetary Council temporarily barred banks from buying back shares without Central Bank authorization, paying dividends above the minimum legally required and increasing managers’ pay. Over the weekend, Economy Minister Paulo Guedes criticized financial institutions for not letting money freed up by the government flow through to companies and individuals.

Earlier, BTG had approved the buyback of up to 15 million of its units. Santander Brasil will automatically extend unpaid debts for 60 days to some credit lines, while Itau temporarily closed 400 branches, said Estado newspaper.

General Motors proposed suspending labor contracts and cut wages of 90% of its workers in its Sao Jose dos Campos city’s unit, according to local metallurgical union, and Honda extend the closure of its production lines. Burger King Brasil’s delivery sales haven’t offset its losses from closed stores, said Folha, citing the firm’s CEO. Airlines and national development bank BNDES are disagreeing over details of the promised aid to the sector, reported Valor.

April 3: Usiminas halted activities; aid to tourism
Steelmaker Usiminas temporarily suspended all the operations at Cubatao Plant and halted part of the activities at Ipatinga Plant, as demand has been falling due to Covid-19 crisis. Homebuilder and developer You defer its IPO planns and retailer Via Varejo postponed their meeting shareholders.

Tourism Ministry will provide special credit facilities to companies and will allow then to postponed in 12 months the reimbursement to clients, as trips and events have been canceled, said the sector minister, Marcelo Álvaro Antônio. After Energy regulator Aneel barred companies from cutting services for lack of payment, governemnt is studying pay the energy bills of poorest people, reported Folha newspaper, citing Mine and Energy minister, Bento Albuquerque. Telecommunication firm Claro announced that some clients will be able to renegotiate debts and extend the deadline of first portion until 20 days.

Jet fuel demand fell more than gasoline, and diesel, which has so far been sustained by agribusiness, has also started to show significant decline, said Petrobras president Roberto Castello Branco. Stated-owned utility Eletrobras has 73% of workers in home office, according to it’s CEO. Giant meatpacker JBS announced it’s looking to fill 3,000 positions in Brazil, but said that they aren’t related to possible increase on absenteeism due to virus spread.

April 2: IOF suspended, layoffs
The Central Bank will be temporarily authorized to lend through guaranteed notes to financial institutions and the IOF tax on financial transactions will be suspended for 90 days, which may give a relief to local lenders. State-owned bank Banco do Brasil canceled it shareholders meeting and oil regulator ANP halted the 17th oil auction round.

Embraer proposed a layoff as well as wage and hours cut to workers of it’s main unit in Brazil, in the city Sao Jose dos Campos, according to the local union. The company said it is analyzing the situation to protect its employees from the spread of the virus and also maintain essential operations.

Oil-processing at Petrobras refineries in Brazil fell in February amid the impact on fuel demand, a trend that should hold in March and April as well.

Marfrig and Minerva halted output in Uruguay meat plants amid strike as workers push for safer conditions in the middle of coronavirus outbreak, according to a person familiar with the matter.

Car rental firm Localiza postponed an interest on equity payment, following peers Movida and Unidas. Burger chain Madero, which wants to do an IPO in U.S, fired 600 employees, Estado newspaper reported. Cooperative Minasul’s president said coffee shipments are running normally.

Homebulider Even approved the buyback of up to 2% of its shares. State-run Caixa will provide special credit facilities to real estate companies, Valor Economico newspaper said.

April 1: Shareholder meetings delayed; Petrobras cuts output
Petrobras doubled its oil production cut to 200,000 from 100,000 barrels per day. Fuel distributor BR Distribuidora will propose to delay a plannned increase on equity payments. BRF hired about 1.4 billion reais (US$268 million) in credit facilities to strengthen its liquidity and is recruiting more than 2,000 people in Brazil and other countries to replace those who may be unable to work because of the pandemic.

Companies from Burger King Brasil to sugar and fuel giant Cosan and tourism agency CVC postponed planned shareholder meetings.

Fiat Chrysler announced some of its local units will temporarily be used by health authorities as medical structures. The automaker intends to resume production in Latin America on April 21, Folha newspaper reported. Toyota wants to do the same a day later.

Utility Neonergia will allow consumers to pay their debts in 12 months. Foreign banks have mostly halted funding to local lenders, Valor newspaper said citing the president of the country’s banking federation.

March 31: Shareholder payments, delayed earnings
Fashion retailer Renner’s board will propose reducing the minimum mandatory dividend to 25%, from 50%, while Arezzo approved the buyback of as much as 10% of outstanding shares. Car rental firms Movida and Unidas postponed interest on equity payments, and tourism agency CVC and petrochemicals maker Braskem delayed their earnings releases. Regulator CVM extended the deadline for companies to release results by five months.

Vale Indonesia agreed to extend the signing deadline related to the sale of 20% of its shares until end of May. Petrobras’s board of directors approved deferring part of their wages until September.

JBS temporarily reduced production in a facility in Pennsylvania, after several senior managers displayed flu-like symptoms. Real estate firm Even halted new projects scheduled for the next 30 days and closed its sales points to avoid large gatherings.

Paper producer Suzano asked banks for a US$500 million stand-by credit facility to help mitigate Covid-19 impacts.

March 28, 29, 30: Airlines, health-care companies
BNDES released 2 billion reais in support to health-care companies and is wrapping up a plan to help airlines, the development bank’s CEO Gustavo Montezano said in a social media broadcast on Sunday. Latam airlines and its subsidiaries followed peers and will suspend most of its international routes until April 30.

Owners of big local retailers warned President Jair Bolsonaro that they can fire about a third of their employees if stores remain closed until mid-April, newspaper Folha reported.

Airplane producer Embraer decided to resume essential operations, which include customer support, aircraft maintenance and manufacturing, it said in a statement Monday. Most employees continue to be on collective vacation or working from home.

Malls operator Iguatemi joined the group of companies that have now scrapped guidances. On the other hand, state-owned utility Eletrobras released its business plan for 2020-2024, elaborated before the Covid-19 crisis and said that is renegotiating some power contracts due to economic impact of the coronavirus pandemic.

JBS announced that will keep a pork processing plant in Iowa open even after an employee there tested positive for coronavirus.

BR Distribuidora and Raizen — a Shell-Cosan JV — declared force majeure on purchases of ethanol as fuel consumption slumped.

March 27: Fintechs, Earnings postponed
Citing the COVID-19 crisis, energy utility Equatorial and education company Cogna postponed their earnings releases, initially scheduled for today. Boards of BRF and real estate firm Gafisa approved share buyback programs.

The National Monetary Council allowed fintechs that operate as direct credit companies to issue credit cards and finance operations with BNDES. Public lender Caixa cut credit card interest rates to 2.9% from 7.7% and increased credit lines in 33 billion reais.

Real estate developer Gafisa ruled out rushed selling of its inventories due to the coronavirus impact, saying its ready to resume launches. Homebuilder MRV, on the other hand, said about 20% of its constructions in progress are suspended. Volkswagen extended the halt in its activities until the end of April, while Ford said it will allow clients to postpone some contracts.

Pilots and aircrew from Latam and Gol approved the proposal of cutting wage and hours by as much as 50% until June, according to national airline workers union.

March 26: Petrobras cuts, guidances scrapped
Petrobras is reducing its oil production until the end of March, cutting US$3.5 billion in spending, postponing dividends and deferring executive pay as the crisis hits oil demand. Replan, Brazil’s largest refinery, is one of those operating at lower levels, according to people familiar with the matter.

Meanwhile, JBS CEO Gilberto Tomazoni said that global demand has so far withstood the disruptions caused by the pandemic. The world’s biggest meat company approved the buyback of up to 10% of its outstanding shares.

After saying it continues to take the necessary steps for the conclusion of the deal with Boeing, Embraer suspended it’s 2020 guidance  —even if it’s had no cancellations in jet orders so far. Telecommunications company Oi did the same.

Steelmaker CSN, which already suspended blast furnaces operations in Europe, mulls doing the same in Brazil, newspaper Valor Economico said. Competitors Usiminas and Gerdau already took similar steps.

Major drugstore chain Raia Drogasil decided to not readjust prices for now, Estado reported. Retailer Via Varejo halted new store openings as it seeks to preserve cash, and medical provider Hapvida plans to postpone elective surgeries to redirect hospital beds and relocate personnel. Toll road operator Ecorodovias saw a drop in preliminary traffic data.

March 25: Banks, energy
Energy regulator Aneel barred companies from cutting services for lack of payment. The measure applies to residential consumers or essential commercial activities, such as hospitals, for the next three months.

Banks will reduce working hours, and set a specific time for elderly clients. Itau will also pay Christmas bonus to employees.

Following other retailers, fashion group SBF decided to close all its stores in Brazil. Two of steelmaker Usiminas’s subsidiaries also granted mandatory vacation for some workers, and cut activities in six units. Deere, the world’s largest tractor maker, said it’s halting production in Brazil.

Some Brazilian companies that import fuels into the nation are seeking to include a release clause in their contracts that would allow them to back out of deals as coronavirus hits demand, according to people with knowledge of the situation.

Healthcare provider Hermes Pardini decided to halt the opening of new units, while cosmetics maker Natura redirected factories to produce essential items and alcohol, pledging to maintain job stability for 60 days.

Following yesterday’s comments from Boeing, Embraer reiterated its commitment to the deal with the U.S. giant.

The country’s exchange operator may allow companies that already paid fees for IPOs derailed by the crisis to list shares until the first quarter of next year without additional costs, Estado newspaper said.

March 24: Vale, airlines, Embraer
Vale asked banks to disburse US$5 billion in credit lines, while also announcing it will advance payments to small and medium-sized suppliers by as much as 85%. Steelmaker Gerdau postponed capex plans for the year and suspended Peru, Argentina and U.S operations.

Airlines announced a fresh cut in flights, with Gol reducing daily flights to 50 until May, suspending all international routes, and Azul cutting down to 70 flights a day, a 90% reduction in total capacity, until April 30.

IMC, which operates Pizza Hut, KFC and Frango Assado brands in Brazil, postponed store opening estimates for this year and 2021, while also reducing its staff by about 30%. In a silver lining, it said deliveries grew by more than 20% in the weekend of March 20-22 compared to March 6-8 period.

Embraer’s shares surged on a report that Boeing still sees the deal with the company as important in the midst of the crisis.

Itau Unibanco decided to suspend dismissals.

March 23: Klabin, malls shut
Renault joined carmakers in suspending activities until mid-April. Retailers Hering and Arezzo shut stores and factories, respectively, while mall association Abrasce said 550 malls across the country are shut -- 95% of the total.

Vale will suspend operations at its Malaysia port terminal that serves as a conduit to China until at least March 31, starting on Tuesday. Paper maker Klabin halted works for its Puma II project.

Beverage maker Ambev canceled its 2020 guidance, and travel agency CVC cut top level executives wages and hours by 50%.

March 22: BNDES help, Embraer
Embraer announced it was placing Brazil employees who can’t do their job remotely on temporary paid leave until the end of the month.

State development bank BNDES suspended payments on as much as 30 billion reais (US$6 billion) of loans for six months to support companies including direct and indirect credit operations. It also released 5 billion reais in working capital to small- and mid-sized companies, and will transfer 20 billion reais to a workers’ severance fund known as FGTS. The total injection from the lender amounts to 55 billion reais.

March 21: Retailers, Burger King
Clothing retailers Marisa Lojas and C&A Brasil will close its stores, as will electronics seller Via Varejo.

Operators of brands Burger King, Popeyes and Outback Steakhouse said restaurants would only take orders for pick-up or delivery.

March 20: Petrobras, automakers
National giant Petrobras postponed the sale of its refineries, and asked banks to disburse US$8 billion in credit lines.

Fashion retailer Guararapes announced it would shut Brazil stores indefinitely, and flipflop maker Vulcabras halted all its Brazilian factories. Mall operator Iguatemi said it was closing another four venues.

Toyota and Fiat Chrysler joined carmakers in suspending operations.

Parana Banco asked for its IPO request to be suspended, the latest in a series of offers now scrapped.

March 19: Airlines help, JBS halt
Gol announced it was cutting wages and working hours in about 35%-40% for some top level executives — even after the government announced a package to help the sector.

Volkswagen and Ford suspended production in Brazil — the latter in Argentina as well. Truck and bus manufacturer Marcopolo, auto parts and the road implements producers Fras-Le and Randon also placed employees on furlough.

Meat giant JBS said it was halting operations in five of its 37 beef units in Brazil for 20 days due to lower export demand, while Minerva, the largest South American shipper, said it would pay workers for time off in four of its units.

State-owned Caixa Economica Federal released special credit lines, with a grace period of up to six months, for retail and service companies.

Fashion retailer Renner extended closures to Brazil, Uruguay and Argentina.

March 17, 18: Vale, malls
After placing its Canadian mine of Voisey’s Bay on “care and maintenance” for four weeks, also said it was revising the shutdown of coal processing plants in Mozambique, which could affect the 2020 guidance.

The following day, the company said it was studying temporarily halting its distribution centre at Teluk Rubiah Maritime Terminal in Malaysia.

Retailer Lojas Renner said it would interrupt activities in stores in the city of Sao Paulo. Mercedes-Benz announced it would grant mandatory vacations, as did General Motors.

BR Malls, Aliansce Sonae and Multiplan announced the temporary closure of their shopping malls in states including Rio de Janeiro to comply with restrictions imposed by local governments — which were followed by Sao Paulo.

Minerva said it was halting production at four plants and pay workers for time off — JBS was considering a similar plan at some Brazilian processing plants.

March 16: Delayed IPO, banks
Airline Azul slashed capacity by 20%-25%, while also lowering executive pay and halting new hires. Competitor Gol followed suit, reducing domestic capacity by 50% to 60%, and international capacity by 90% to 95%.

Meatpackers JBS and Minerva were said to be mulling paid time off on some of their Brazil plants as the outbreak hit demand, while Vamos was said to delay its IPO.

The five largest banks associated with Brazil’s Banking Federation have announced that they are open to meet requests for extension of debt maturities of individuals and micro and small businesses.