Brazil fund manager warns fiscal pullback will squeeze company margins
The winding down of fiscal stimulus is likely to weigh on the earnings of listed Brazilian companies next year, according to Rodrigo Heilberg, founder of asset manager HIX Capital. Speaking on the Stock Pickers programme hosted by Lucas Collazo, Heilberg said falling profit margins and weaker operating results would make the search for earnings growth on the Brazilian stock exchange complex, with the exception of capital markets names such as B3, XP and BTG Pactual.
Heilberg argued that investors should favour companies that do not depend on domestic consumption and that have predictable, contracted revenue. He said navigating the period without relying on government incentives or electoral cycles is difficult but not impossible, and that HIX has concentrated its resources in businesses with dependable cash flow and resilient demand, citing Eneva, OceanPact, GPS and Cury.
In the power sector, Heilberg said curtailment - the periodic oversupply of renewable generation - briefly lifts megawatt-hour prices at peak times and widens margins for thermal plants running on their own natural gas. He attributed Eneva's performance in part to the capacity reserve auction held in March this year, which he said supports earnings growth without requiring faster consumption of fuel reserves. "It will have much more result spending far less molecule, and the duration of the cash flow goes back somewhat to that point: maybe it had 10 years of gas, maybe it has 20 years of gas," he said. "So there is more profit and more time to monetise that gas."
Beyond energy, Heilberg pointed to consolidation in the shipping and offshore support sector as a source of scale gains for suppliers to Petrobras. He said the merger of OceanPact's and CBO's fleets created an operation of almost 70 vessels, benefiting from a global shortage of ships and limited capacity at shipyards. The defensive mix also includes providers of essential cleaning and security services such as GPS, which combines organic growth with acquisitions, and homebuilders focused on the Minha Casa, Minha Vida housing programme, such as Cury.
Heilberg said the priority remains preserving capital in high-quality corporate assets. "I think we still have a very strong bias toward staying in very solid companies, even understanding that they will not be the companies that rise the most," he said.
