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30 May 2016, Vanessa Maebara, EMIS Editor

Corporate earnings increased in 2016

Due to the political turbulence and a declining economy, most publicly traded companies have been through difficult times in the first three months of 2016. However, the corporate earnings improved due to a lower fluctuation in commodities prices and a more favourable exchange rate.

According to Valor Economico International, the real strengthened about 10% against the dollar during the quarter, lifting part of the pressure over companies' debt in foreign currency, on the other hand the combination of lower volatility in commodities prices with a real 27% weaker against the dollar in the annual comparison helped exporters.The combined net sales of the companies included in Valor Data's survey grew 4.8%, to R$312.9 billion, and their net income rose 31.7%, to R$11 billion.

The figures above exclude Petrobras, Vale and Eletrobras, which would cause distortion in data, increasing the combined first-quarter net profit to R$12.2 billion.

Despite is early to predict a trend for corporate earnings, in the next few months companies are inclined to make deep adjustments, controlling general and administrative expenses.

J.P. Morgan has a favourable view for the exchange rate due to the change of government, which according to the latest projections is expected to end 2016 at R$3.70 to the dollar and in 2017 at R$3.90.

Sign in and read the full article in emis.com Original source: Valor Economico International

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