Den brasilianske landbrugskemikaliesektor er fortsat meget modtagelig over for pludselige ændringer i klimaforhold, markedspriser og valutakurser.
- Despite a sluggish recovery of the Brazilian economy, both chemicals and pharmaceuticals businesses are expected to improve their results and margins further this year. However, the level of competition in both the chemicals and pharmaceuticals sectors is high and industry consolidation is ongoing - in particular among medium-sized and large players.
- Value added in the pharmaceuticals subsector grew by more than 7% in 2018 and is expected to increase about 3% in 2019. The segment remains robust, despite the downside risk of less public health spending due to austerity policies. Demand for innovative medicines/specialised drugs will continue to grow, driven by urbanisation and an ageing population, which will provide pharmaceutical businesses with good revenue-generating opportunities. Demand for healthcare services, medicines and elderly care will increase further in the mid- and long-term. Larger drugstore chains continue to expand and to open new stores, increasingly offering over-the counter (OTC) products like cosmetics and selling natural healthy foods.
- Apart from a few large players, most Brazilian chemicals and pharmaceuticals businesses are still highly leveraged, which is also the result of previous expansion activities before the recession started in late 2014. While being highly dependent on bank financing, financial institutions are generally willing to provide loans to chemicals and pharmaceutical businesses, as business opportunities for distributors and investors are good.
- Payments take up to 120 days in the chemicals sector and average 90 days in the pharmaceuticals industry, with payment behaviour influenced by consumer spending capacity and public sector spending behaviour. Payment experience has been good over the past two years, and we expect chemicals/pharmaceuticals insolvencies to decrease by about 5% in 2019.
- Our underwriting stance on the pharmaceuticals sector is generally open, as the main market players have rebounded. The market mainly consists of resilient distributors and retailers. However, we are more cautious with players depending on sales to public bodies, as austerity measures could lead to further curbs in public health spending.
- Our underwriting stance on the chemicals sector is neutral. Chemicals has been affected by lower demand from China, but the 2019 outlook is more promising. The agrichemicals sector remains susceptible to sudden changes in important exogenous factors like climate, market prices and exchange rate fluctuations. In the basic chemicals subsector most raw materials have to be imported, and production costs are exposed to exchange rate volatility and the looming threat of trade restrictions. Petrochemicals performance could be impacted by increased oil price volatility, e.g. triggered by the current US-Iran conflict.