During the 1990s the Brazilian equities market was dismal, and by 2003 the number of public companies had declined from almost 1,000 to about 700, with fewer than 370 companies listed on Bovespa, the country’s main stock exchange.
Recently, however, the stabilization of the economy created a phase of healthy development that led several companies to go public and, consequently, provoked an increasing demand for IROs (a legal requirement for all Brazilian public companies).
Since 2004 market capitalization of Bovespa-listed companies has grown by over 80 percent. And in 2006 the market saw 41 IPOs, compared with only three between 2001 and 2003. From 2002 through mid-2007, the daily average trading volume increased from R$250 mn ($132 mn) to R$4.7 bn, while thee time number of individuals investing directly through the exchange rose from 85,000 to about 250,000.
Although IR activity was almost unknown in Brazil before, in recent years it has gained importance. It is now vital for Brazilian firms striving for good corporate governance and an essential tool for a successful IPO. The IRO’s profile has also evolved, with IROs often assuming the role of financial spokesperson, a position formerly filled by the CEO or chairman.
The increased number of companies entering Bovespa’s Novo Mercado, the demands of a globalized market and the lack of an IR culture in the past all mean there is a scarcity of qualified professionals in Brazil. Moreover, Brazilian IR faces several challenges, according to a recent survey conducted by the Brazilian Investor Relations Institute (IBRI) and Fipecafi, a major financial research institute in São Paulo.
It indicates that IR here requires not only the knowledge of both domestic and international markets and the ability to communicate in English, but also a deep understanding of the company and where it is fits into the Brazilian and international markets.
June was, therefore, an appropriate time to recognize IR excellence in Brazil. IR magazine, in association with Revista RI and IBRI, held its third consecutive IR Magazine Brazil Awards in São Paolo, which followed a survey of investors and analysts to identify the best in the market. Here are some winners’ highlights.
Vale do Rio Doce (CVRD)
CVRD, the world’s second largest mining company, was the major winner, receiving four awards. The profile of the firm, privatized in 1997, its technological sophistication, performance and investment rating were all strong factors contributing to its wins, says Roberto Castello Branco, CVRD’s IRO and a former president of IBRI.
‘Our work in IR emphasizes transparency as an essential part of our growth process and it is part of the strategy that generates effective results at our company,’ he notes. ‘In terms of market capitalization, we grew from $9 bn in 2001 to over $110 bn today.’
Marcopolo
Marcopolo, one of the world’s largest manufacturers of bus body parts with a presence in more than 100 countries, has always adhered to good corporate governance practices since its founding in 1949.
‘It is in the DNA of our firm to deal with shareholders – we have always been very transparent,’ says Carlos Zignani, IR director at Marcopolo, which took home the grand prix for best overall IR in the small and mid-cap range.
Petrobrás
Petrobrás’ IR director Paulo Campos says one major strategy of the company has always been to support and create an investment culture among individuals, which perhaps explains why the firm was recognized as having the top IR program for the individual investor.
‘They enjoy the same VIP treatment provided to institutions,’ Campos says. So much care and attention to the ‘small ones’ makes sense, he adds, because 94 percent of the company’s shareholders are individuals, owning a collective 8 percent stake.
Natura
Listing just three years ago on Bovespa’s Novo Mercado, Natura, a cosmetics, hygiene and perfume company, has proven its commitment to corporate governance.
Helmut Bossert, IR manager, says the company’s awards for sustainability and corporate governance are due to its high-quality communication. ‘Our visibility is broad and this reassures investors,’ he says.
Klabin Segall
Klabin Segall, a 13-year-old company that is now one of the largest real estate developers in Brazil, had plenty of reasons to be recognized for running the best IPO. Its transparency record and its sound accounting structure were the main influences, combined with the fact that the firm sees its shareholders as long-term partners, according to Eurico Magno de Carvalho, CFO and IRO.
Gerdau
Gerdau, a major steel company, was first to adopt teleconferences in two languages in 1999, following the listing of its American depositary receipts on the NYSE. Since then, the company holds quarterly earnings presentations for investors in Brazil and abroad.
‘Our concern has always been to provide homogeneous information to the market,’ explains Osvaldo Schirmer, vice president of IR at Gerdau, which tied in the best conference call category with Banco Itaú Holding Financeira. ‘We adopted the written speech model, with the same presentation made in Portuguese and in English.’
Totvs
Rodrigo Nasser won best IRO in the small and mid-cap range for the program he runs for Totvs, a company engaged in the development and sale of management software. Totvs is new to the market and Nasser says the listing on the Novo Mercado was an intelligent and successful decision. Today, the company has 4,500 shareholders, 70 percent of whom are not from Brazil.
Brasil Telecom Participações
After two years of bad press focused on shareholder conflicts, Brasil Telecom Participações made a turnaround and gained some positive attention. The IR manager, Flavia Menezes, regards the award for most improved IR as a clear recognition of the company’s efforts to improve governance and its relations with investors and analysts. ‘Now, the company has the chance to show its face and be accountable to its audience,’ he says.
