Ibovespa Drops as Results Fall Short of Already Dismal Estimates

  • Ambev, Pao de Acucar post quarterly declines in profit
  • Oi posts biggest drop on index after merger support scuttled

The Ibovespa fell the most among major benchmark in the Americas after disappointing earnings results.

Brewer Ambev SA and supermarket chain Cia. Brasileira de Distribuicao declined after reporting a drop in earnings as retail sales tank amid the worst recession in more than a century. Of 27 companies that have reported fourth-quarter results, most have fallen short of analysts’ already dismal estimates, data compiled by Bloomberg show. Vale SA extended a three-day slump to 13 percent as the world’s biggest iron-ore miner reported deepening losses.

The gloomy outlook for companies is adding to concern that Brazil’s government isn’t doing enough to turn the economy around amid a political paralysis fueled by a corruption scandal and efforts to impeach the president. Brazil’s benchmark equity index has declined 19 percent over the past year as Rousseff failed to get support for measures intended to revive the economy and close a crippling budget gap.

"Prospects for the Brazilian economy are bad and continue to get worse every day," Newton Rosa, the chief economist at the financial conglomerate Sul America SA, said in a telephone interview. "The bad performance of the retailers is a result of that. But the worst part is that we don’t see any signs of improvement."

The Ibovespa slid 0.5 percent to 41,887.9 at the close of trading in Sao Paulo as 27 of the index’s 61 stocks tumbled.

Ambev lost 2.6 percent as profit trailed analysts’ estimates by 24 percent. Pao de Acucar, as Brazil’s biggest grocery-store chain is known, lost 3.1 percent after it reported Thursday that net income slumped 99 percent.

Phone carrier Oi SA was the worst performer on the index, losing 19 percent, after LetterOne Technology said it withdrew its proposal to help finance a merger between the company and Tim Participacoes SA after four months of trying to structure a deal.

Steelmaker Gerdau SA and its partner company, Metalurgica Gerdau SA, slumped at least 4.8 percent as federal police said the group was targeted in a national tax evasion and bribery investigation. Gerdau confirmed by e-mail that it was included in the police action, while stating that it maintains strict ethical standards and is available to answer inquiries from authorities.

Steelmaker Usinas Siderurgicas de Minas Gerais SA jumped as much as 8.8 percent after Reuters reported Ternium SA isn’t currently considering selling its stake in the company. Shares pared the advance to 1.1 percent by the end of the session.

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