It was a night of salsa, merengue, samba and a lot of investor relations talent at the third annual IR Magazine Latin America Awards, held in New York on November 17, 2003. Over 250 CEOs, CFOs and IR professionals gathered to celebrate the best and brightest in Latin American IR. After a year when economic and political turmoil plagued the region, the event provided the perfect opportunity to cheer on IR professionals and senior management teams who impressed the Street during these challenging times.
Winners were chosen in 12 categories through an independent survey of around 150 buy-side analysts and portfolio managers and sell-side analysts from 17 countries. The survey was done by New York-based Erdos & Morgan between August and September 2003.
As well as choosing winners, the survey uncovers the buy- and sell-side’s perspectives on the state of IR in the region. For example, the global investment community isolates Brazilian companies as the best practitioners of investor relations in Latin America. Mexican IROs are second in terms of their IR expertise, followed by Chilean, Argentinean and Peruvian IR professionals, according to the survey.
Latin American IROs need to be consistent in providing information to investors and analysts because respondents cite it as the most important factor influencing their decision to buy or recommend Latin American equities. Specifically, 76 percent of the 150 respondents claim this is the most influential issue for their selection process. A full 70 percent of respondents also consider quality of financial reporting as important to their decision-making process.
Grand slam
This year’s big winner was Mexico’s Corporación Geo, which took home the most awards, winning in four categories including the grand prix for best overall investor relations in the small-cap category. This is the first time the company has received an award. Corporación Geo spent the past year revamping its business model including corporate communications and corporate governance, according to Iv?n Vela, director of finance and equity markets.
Vela attributes Corporación Geo’s success to a great team effort and the fact that senior management took a new approach to IR in 2003. ‘We are a small-cap company but we want to have an IR team of the same caliber as a large-cap company,’ he says. ‘We reconstructed our IR staff and worked extensively with senior management to help them understand the markets and what investors wanted.’ Another factor that may have contributed to the IR team’s success is the fact that the company is not family-owned, unlike many Mexican firms, and the majority of the board is independent.
Vela also won the award for best IRO in the small-cap category. He says the secret to really good investor relations is ‘feeling passionate about your company’ as well as establishing continuous and close relationships with investors.
Another multiple winner this year was Companhia Vale do Rio Doce (CVRD). The Brazilian mining-giant picked up three awards including the grand prix for best overall investor relations, best annual report and best investor relations by a Brazilian company in the large-cap category. Analysts and investors had nothing but praise for the company’s investor relations team. As one survey respondent confirms, ‘[CVRD has] one of the best major IR teams; financial reports are very complete and [the team] is accessible at all times.’
Cemex, too, took home several awards in 2003. The Mexican cement producer won best corporate governance, best communications with the retail market and best IRO in the large-cap category.
Cemex’s IR team was hard at work implementing new governance practices to increase transparency and ensure compliance this past year, says Maher Al-Haffar, managing director of corporate finance. Among those changes, the company established an independent audit committee, initiated the process of internal certification by the company’s CEO and CFO and set up an anonymous communications system so employees could report any accounting wrongdoings or concerns. In upgrading its governance structures, the company clearly made a good impression with analysts and investors. A survey respondent says: ‘[Cemex] discloses everything that could put minority investors’ interest in jeopardy in 20-F filings, annual reports, quarterly reports, conference calls and company meetings.’
‘We’ve been very conscious of this whole process,’ notes Al-Haffar. ‘We’ve gone a long way to increase transparency and ensure that the flow of information to senior management and the board is as independent and timely as it can be.’
To boost retail shareholder communications, Cemex recently introduced a new direct-stock purchasing program via the web, says Al-Haffar. In addition, the company revamped its web site to make it more investor-friendly.
Cemex’s IR team has been meeting up with brokers in the US and Canada more frequently in the last two years. It’s an effort that paid off significantly, with retail holdings jumping from 2 percent to 7 percent over the period. ‘We’ve done a lot of things on the retail side because we think it’s an extremely important shareholder base for us, especially in the US and Canada,’ says Al-Haffar. Because of its success with North American retail holders, the company is now piloting a program to target European retail investors. ‘We expect to probably triple retail participation [outside of Mexico] in the next five years,’ Al-Haffar adds.
Top-level IR
This year two individuals tied for best IR by a CEO or chairman: Telmex’s Jaime Chico-Pardo and Votorantim Celulose e Papel’s Raul Calfat. Calfat claims the secret to IR excellence is making investor relations a top priority. The Brazilian CEO backs this up by participating in all analyst conference calls and frequently meeting with investors.
The best advice Calfat can offer to fellow CEOs looking to improve their IR grade is to ‘always be honest.’ In investor meetings, he often outlines different scenarios of supply and demand for the company’s products in order to give investors a realistic picture of the firm’s potential.
‘Always tell the truth because this builds credibility,’ he emphasizes. ‘If you always talk about the positive aspects, you will lose credibility. It’s very important that whenever there is a negative prospect or any potential for one, you give the financial market a heads-up.’
Sweet victory
With Argentina’s 2001 economic crisis still casting a shadow over the country, IROs in this country suffered the toughest challenges over the last 12 months. As such, victory never tasted so sweet for IRSA, winner of best IR by an Argentinean company. Alejandro Elsztain, director and CEO of IRSA, says the company made some good decisions recently. ‘We were the only company in Argentina that decided to invest when everyone wasn’t,’ he says.
Elsztain says the formula for surviving a national economic crisis is remaining transparent with investors. ‘Whenever we meet with investors we tell them everything, from our origins to our problems to the solutions to those problems,’ he notes. Once the country’s economy collapsed, IRSA embarked on a marketing campaign to inform investors of its plan to repay debt, which it has since successfully completed. As one survey respondent says of IRSA: ‘I like its strategy; it has a strong balance sheet and has good communications.’
This year’s Latin American awards also heralded a new category: best IR by an Andean company. Venezuelan, Peruvian and Columbian firms competed for the title, and it was won by Peru’s Buenaventura, which also won for best IR by a Peruvian company in 2002.
What did Buenaventura do to gain its gongs? Carlos Galvez, manager of corporate finance says efforts included adding more IR staff and reviewing IR strategy, with the aim of providing more information to analysts and investors. Being transparent and keeping in contact with investors and analysts is Buenaventura’s mantra.
The IR team also has big goals for 2004, concludes Galvez: to visit at least 30 percent more investors than were visited in 2003.
