SAO PAULO May 4 A gradual economic recovery in
Brazil coupled with higher commodities prices should help
domestic firms generate more cash in coming months, reducing
short-term liquidity risks, analysts at Moody's Investors
Service said on Thursday.
Moody's analysts led by Erick Rodrigues said in a report
that Brazilian firms may find it increasingly easier to cover
their funding needs over the next two years as the economy
emerges from Brazil's worst recession on record. Lower interest
rates are also providing some relief for debt-laden firms, the
Only 16 percent of 37 Brazilian non-financial companies
monitored by Moody's had risks seen as "high" related to
fund-raising last year, compared to about 22 percent in 2015.
Funding risks for state-controlled Petróleo Brasileiro SA
, known as Petrobras and the world's most indebted
major global oil firm, have declined but continue to be high,
the report said.
The report underscored an improved outlook and gradual
improvement in corporate profits. For the past three years,
mounting political and economic turmoil dragged on results at
some of the country's largest companies.
Signs that Latin America's largest economy is emerging from
a recession that is entering a third year have fueled hopes that
demand will gradually pick up this year and in 2018, the report
"A robust improvement in credit quality will depend largely
on sustained recovery in demand," the report added.
A preliminary analysis of first-quarter results has shown
signs that factories, services companies and commodity producers
have been able to improve their ability to generate free cash
flow, or the money left for bond and shareholders after all
expenses are paid.
That has come despite tepid sales and revenue growth, cost
pressure and still-high debt servicing costs.
Vale SA, the world's largest iron ore producer,
generated $2.454 billion in free cash flow in the past quarter,
surpassing a $2.2 billion full-year target.
(Reporting by Bruno Federowski; Editing by Guillermo
Parra-Bernal and Tom Brown)