Brazilian billionaire Eike Batista, whose commodity startups have lost $8.6 billion in market value this year, is getting some relief from his logistics company.
LLX Logistica SA’s 19 percent rally in the past month was the biggest among major Brazilian stocks and global peers after Batista focused the company on being an oil services port by luring Petroleo Brasileiro SA and Waertsilae Oyj.
Batista, 56, is using LLX to target a looming infrastructure shortfall created by Brazil’s offshore oil boom. LLX’s success in winning business contrasts with missed project targets and rising costs at Batista’s other companies, whose falling value caused creditors to demand additional collateral.
“Investors may have been buoyed by news about new contracts,” Saulo Sabba, who oversees 350 million reais ($176 million) as chief investment officer at Banco Maxima SA, said by telephone from Rio de Janeiro. An agreement with Petrobras would bolster LLX “without a doubt. Eike needs things to happen.”
LLX’s Acu complex in Rio de Janeiro was originally showcased as an industrial complex that would become the world’s third largest port, catering to clients from iron-ore miners to carmakers. Prospective deals with Nissan Motor Co., steelmaker Ternium SA and oil service provider Subsea 7 SA to set up plants in the complex failed to materialize over the past 18 months.
As global commodity prices slipped into a bear market in June and his interlinked energy and raw-material companies reduced production targets, Batista offered to pay 3.13 reais per share to delist LLX in July. The plan was canceled two months later, after Bank of America Corp. valued the shares at 6.94 reais to 7.63 reais.
The shares have slumped 29 percent since the Sept. 13 suspension of the de-listing and 43 percent in the past year, the worst performance among 16 logistics peers tracked by Bloomberg in that period. The group gained 16 percent in the same period while Brazil’s Bovespa index slid 17 percent.
LLX trades at 1.79 times book value compared with the peer-group average of 2.96 and a ratio of 1.07 for the Bovespa, according to data compiled by Bloomberg. LLX fell as much as 4 percent to 2.14 reais in Sao Paulo today.
A new focus on the oil industry includes housing the operations of a joint-venture between Batista’s holding company, the EBX Group Co., and BP Plc to produce and sell maritime fuel. The change comes ahead of LLX’s March 26 earnings report, when three analysts estimate it will post a 27.9 million-real net loss for the fourth quarter, the largest in three years.
Acu caters to a region spanning from southern Espirito Santo state to northern Sao Paulo state, where Petrobras is looking to set up facilities to avoid overloading the ports of Macae and Rio de Janeiro as it starts a plan to more than double production in the next seven years, Jose Formigli, head of exploration at the state-run oil company, said March 19. Petrobras is holding talks with LLX, he said. Acu is near the offshore Espirito Santo and Campos basins.
This month LLX also announced agreements with Waertsilae and Intermoor Inc. to use the port and secured a permit to install a liquefied natural gas plant.
“For Petrobras, support ports have always been a concern because most of their operations are offshore,” Lucas Brendler, who helps manage 5 billion reais at Geracao Futura, said by phone from Porto Alegre, Brazil. “If Petrobras is looking to increase activities at Campos and Espirito Santos, a partnership with Acu and a logistics base in the area makes sense.”
Petrobras owns Brazil’s two LNG terminals. A third at Acu plant would service MPX Energia SA, Batista’s electricity company, and other companies located in the port complex, LLX’s press department said in an e-mailed response to questions, declining to comment on negotiations with Petrobras.
LLX’s rebound in the past month may be more about a financial arrangement between Batista and Esteves than the prospect of luring new port clients, Eduardo Carlier, head of equities at Schroeder Investment’s Brazilian unit, said by phone from Sao Paulo. The agreement earned Esteves a place on a new EBX advisory board and gave EBX access to a $1 billion credit line. BTG’s press department declined to comment on the arrangement in an e-mailed responce to questions.
Batista’s six trading units had a combined total debt of 24.5 billion reais based on their latest available figures for 2012, compared with 21.5 billion reais in combined market value, according to data compiled by Bloomberg. Shares of Batista’s oil and gas company, OGX Petroleo e Gas Participacoes SA, plunged 40 percent this year while his iron-ore producer MMX Mineracao & Metalicos SA lost 36 percent.
OSX Brasil SA, Batista’s shipbuilder, is building its shipyard in Acu. While the company was created as a supplier for OGX, attempts to diversify its client base led to a $900 million contract last year to supply two floating production, storage and off-loading platforms, or FPSOs, to Petrobras.
Petrobras plans to hire 15 new FPSOs through 2017. Support for the platforms will be the driver for Petrobras’s vessel fleet growth. In the port of Rio alone, Petrobras vessel activity should double by 2015, according to Rogerio Caffaro, chief executive officer of Triunfo Logistica Ltda, which operates Petrobras’s activities in the port.
“The oil industry has a limited amount of service providers,” Geracao’s Brendler said. “Petrobras looks to be seeking to diversify as much as possible to not depend on any one provider.”