Passing the baton in Brazil

In Brazil, investor relations is viewed as a young discipline, born in the 1990s and maturing in the last decade. It’s only fitting, then, to celebrate the fact that the big winners at the eighth annual IR Magazine Brazil Awards represent a new generation of young public companies.

Localiza Rent a Car, the top large-cap winner, went public in 2005, and Kroton Educacional, the winner of more awards than any other company, listed in 2007, as did Eztec, which achieved nominations in seven categories.

It’s also fitting that the big winners of past years are still setting an example and taking home trophies: pioneers of Brazilian investor relations like Vale, the mining giant, or energy utility Cemig, which recently marked the 10th anniversary of its ADR listed on the NYSE.

Itaú Unibanco, which has won the grand prix three times since the awards’ inception, and OdontoPrev, a two-time grand prix winner, didn’t win this year but still ranked highly across many categories.  

Luiz Fernando Rolla, Cemig’s CFO and head of investor relations, who is also president of IBRI, Brazil’s investor relations association, says Cemig started early, incorporating IR into its strategy in the early 1990s.

Now he’s pleased to see the new crop of winning companies. ‘We are very happy those companies are having the recognition of the market,’ he says. ‘They learned very quickly.’

How the winners won In partnership with Revista RI, and with the support of IBRI, the Brazilian investor relations institute, IR Magazine commissioned the research unit of Fundação Getulio Vargas (FGV), Instituto Brasileiro de Economia, to survey Brazilian investors and analysts. This eighth annual study, conducted in April and May 2012, gathered responses from 170 investment professionals from a sample compiled by FGV, Bloomberg and IR Magazine. FGV aimed for a cross section of the investment community, a fair balance of sell-side analysts, buy-side analysts, portfolio managers and financial advisers covering the full range of sectors. For the category of best investor relations for individual investors, FGV also surveyed 436 individual investors from a sample of 44,000 provided by GEO Eventos’ Money Expo. The full research from FGV, which includes in-depth comments from the survey respondents, is published in IR Magazine’s Estudo de Percepção do Investidor, Brasil 2012. Please see www.irmagazine.com/investor-perception-studies for more details.

This year’s grand prix winners are also following in the footsteps of Cemig and Vale as they target US investors.

Localiza launched a level I ADR just weeks before the awards, and one of Kroton’s goals for 2012 is to study the possibility. ‘We are going to focus on the ADR in order to increase liquidity,’ explains Silvio Guerra, Localiza’s IR chief.

He has a compelling story for his new cache of investors: a business model with consistent results through the ups and downs of the Brazilian economy for the last 15 years, in a new sector in a country with good prospects for growth.

‘There is also the management of the company: stable management, very specialized’ with a C suite fully engaged in IR, Guerra adds.

Another thread tying many of the winners together is successful turnarounds. Cia Hering started a turnaround in 2007 and, having posted consistently strong results, is reaching a new inflection point.

‘We are going through a challenging moment because that strategy is maturing, so in terms of aligning expectations with the market, we think this is a very important period,’ says Patrícia Salem, Cia Hering’s IR manager.

Kroton began its transformation back in 2010, then wowed the market in 2011. ‘Last year, of course, it was very intense,’ observes Carlos Lazar, IR director, as he describes capital raisings totaling nearly R$1 bn ($500 mn) and the biggest ever acquisition in Brazil’s education sector.

‘At the same time there was growth in our transparency and in interest from analysts, [and] growth in investors in the company.’

As for Eztec, from an IPO price of R$11 in 2007, it dropped below R$2 in 2008. This year it surpassed expectations and hit more than R$20, and is the only one of 25 listed Brazilian real estate companies to be nominated for the awards.

Emilio Fugazza, Eztec’s CFO and IR head, sees IR as educational, helping the investment community understand the real estate sector and teaching it about Eztec’s business model.

Eternit traces its history back much further, to its listing in 1948. But its modern IR era began in 2004, when it adopted best corporate governance practices, recounts Rodrigo Lopes da Luz, Eternit’s IR manager and IBRI’s deputy director for São Paulo. An ‘open doors’ program has since seen 53,000 visits by analysts, investors, journalists and others.

Whether it’s a long-lived company like Eternit, a national icon like Vale or a young company like Kroton, these award winners show that Brazil’s IR community, like Localiza, is adaptable and capable of constant improvement.

‘Our main objectives are liquidity and valuation, and in that sense we always try to search for the best practices worldwide,’ Guerra concludes.

See video interviews with Localiza, Kroton, Cemig and others at www.irmagazine.com/ir-tv.