Tortilla Maker Gruma Falls After Venezuelan Devaluation

Gruma SAB, the world’s biggest tortilla maker, tumbled in stock trading along with other Latin American companies that sell products in Venezuela after the nation devalued its currency by almost a third.

Gruma fell 3.3 percent at the close of trading in Mexico City while Masisa SA, Chile’s biggest maker of wood panels, dropped 4.1 percent in Santiago. Buenos Aires-based Arcos Dorados Holdings Inc., the biggest franchisee of McDonald’s Corp. restaurants in South America, fell 3.6 percent in New York after Morgan Stanley said in a report that Venezuela accounts for 18 to 19 percent of the company’s operating income.

Venezuela said Feb. 8 it will weaken the bolivar by 32 percent, the fifth devaluation in nine years. That may cut into income for companies that sell food and consumer goods in Latin America’s fifth-biggest economy, as they translate profit back into their home currencies.

“What really counts is the bottom-line translation,” said Gustavo Teran, an analyst with Mexico City-based Corp. Actinver SAB, in a telephone interview. “So if the bottom line was $10, and now it’s $7 because of the devaluation, it’s a 30 percent lower contribution from Venezuela to the consolidated results.”

Consumer companies will be affected the most, Morgan Stanley analysts including Javier Martinez de Olcoz and Cesar Medina, wrote in a report to clients. Other Latin American stocks that may suffer include the Mexico City-based bottler Coca-Cola Femsa SAB and Panama City-based airliner Copa Holdings SA, they wrote.

Copa Charge

Copa may record a charge of $30 million to $40 million associated with the devaluation, according to Morgan Stanley.

Coca-Cola Femsa retreated 1.2 percent to 198 pesos in Mexico City, while Copa advanced 0.1 percent in New York to $103.06 after earlier falling 0.7 percent.

Gruma, based in San Pedro Garza Garcia, Mexico, got 16 percent of its revenue from Venezuela in 2011, according to data compiled by Bloomberg. The devaluation may cut the share of revenue to 9 percent, said Gaspar Quijano, an analyst at Vector Casa de Bolsa SA in Mexico City who rates the stock hold.

Today’s drop in the shares is “not that bad considering the impact that this is having on the company,” Quijano said in a telephone interview.

Venezuela is Santiago-based Masisa’s biggest market, accounting for a quarter of revenue in the first nine months of last year, according to regulatory filings.

Airline Tickets

Masisa “will have a lot of revenue in bolivars and to bring that back in dollars will cost more,” Jose Manuel Edwards, an analyst at Santiago-based broker IM Trust SA, said in a telephone interview.

Venezuelans lined up this weekend to purchase airline tickets and TVs to protect themselves from the imminent increase in prices. About 70 percent of products consumed in the country are imported or assembled from raw materials shipped from abroad, according to the Consecomercio trade chamber in Caracas.

The systemic impact on Latin American equity markets should be “limited,” according to Morgan Stanley, because investors have been reducing their exposure through equities to Venezuela since 2006.

Voicemail and e-mail messages left for a Gruma spokesman and a Coca-Cola Femsa spokeswoman weren’t immediately returned. A voicemail and an e-mail left for Copa’s investor relations office was not immediately returned. Phone calls to Masisa press representatives weren’t answered. A call to Arcos Dorados’s main office number in Buenos Aires wasn’t answered. Markets in Argentina were closed today due to holidays.

To contact the reporters on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net; Danielle Verbrigghe in New York at dverbrigghe@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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