Multilatinas: A good year for transportation and retail

Multilatin companies had a 5.9% drop in revenue from June 2011 to June 2012. This is the main result that emerges from the analysis of the quarterly Latin Business Chronicle Multilatinas Index.

The figure confirms the weakening of economic activity that has been anticipated by most economic analysts, but the Index also shows that clearly it is not a decline for all companies across the board.

When the Index is broken down by industry it is clear that the 2Q12 revenue dip was largely induced by lower commodity prices and its effects were contained to a degree, to certain business areas. Sales in transportation, retail and telecommunications and media grew at a healthy 4% year over year, while in oil, mining, food and beverages fell 10%.

On the good side of the spectrum, transportation company LAN TAM increased its revenues by a hefty 16%, Chilean retail Cencosud by 14%, five ‘indexed’ industrial companies by 6.5% and three telecom and media companies by 1.6%. Hence the feeling of general weakening of business in Latin America is not precise.

Commodity prices took a nose dive in April 2011, as the financial markets were hit by concerns over an excessive European sovereign debt, which triggered fiscal austerity and a slowdown in European and global growth.

The scene for raw materials worsened as China began to show signs of decreased economic dynamism. The Scotia Commodity Index fell 19.5% since the April peak.

As a result, five Multilatinas on the mining and steel industries of the Index saw a 16% revenue cut in 2Q12 year over year. Oil company Petrobras had a 9% drop, and nine ‘indexed’ companies on the food and beverage industry posted a 1.9% dip.

The region will indeed see a slowdown. Consensus Economics expect regional GDP to grow 3.1% by year-end, a percentage point lower than the 4.1% registered in 2011. A less optimistic Bank of America Merrill Lynch expects GDP growth to be as low as 2.7% this year.  But as the Multilatinas Index shows, in Latin America the glass for business still seems to be half full.

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