Hypermarcas to Refinance Local Debt as Borrowing Costs Fall
The company will prepay or refinance about 200 million reais ($98 million) of bonds by year-end, Chief Financial Officer Martim Mattos said in an Oct. 4 interview at Bloomberg’s office in Sao Paulo. The transaction follows Hypermarcas’s move in July to fully redeem 200 million reais of local bonds that paid 113.72 percent of the interbank rate, known as the CDI. In October 2011, the company refinanced 200 million reais of debentures, cutting the rate to 105 percent of the CDI from 113.7 percent.
Hypermarcas is seeking to reduce its interest expenses after taking on debt to make acquisitions to gain market share and boost revenues, Chief Executive Officer Claudio Bergamo said in the same interview. Hypermarcas, which makes more than 190 products as varied as Jontex condoms to generic Valium, spent $4.9 billion on 21 acquisitions in the past decade, the most among Brazilian consumer-goods companies, data compiled by Bloomberg show.
“This is a company we expect in two or three years will have very low debt,” Bergamo said, adding that he also sees “great potential for dividends.”
The yield on the company’s 2021 dollar bond declined 3.19 percentage points, or 319 basis points, since the end of November to a record low of 5.3924 percent on Oct. 4. Hypermarcas expects net debt to fall to two times its earnings before interest, taxes, depreciation and amortization as soon as the end of 2013, from a ratio of three times in the second quarter, Bergamo said.
Hypermarcas shares rose 2.3 percent to 15.95 at 3:25 p.m. in Sao Paulo trading, bringing its year-to-date gain to 88 percent. That’s the best performance this year on the benchmark Bovespa index, which is up 3.8 percent.
The company is now focused on organic growth and absorbing recent acquisitions, as well as boosting cash flow, he said. Investments will fall to 150 million reais in 2013 from as much as 220 million reais this year, Bergamo said. Annual spending will then decline to a range of 80 million to 100 million reais, he said.
The company plans to close or sell 10 of its 14 existing consumer product plants and transfer the output to a new, larger facility that will open by the end of next year in the city of Senador Canedo, in Brazil’s Goias state, Bergamo said. Hypermarcas may raise as much as 200 million reais from the asset sales, the executives said.
Hypermarcas aims to produce its own packages and simplify logistics with the new plant and a distribution center in Goiania, also in Goias, Bergamo said.
“Consolidation of sales and structure will help boost consumer goods sales in the medium and long term,” Bergamo said.
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