新兴市场公司研究-HY Multi Sector IG Multi Sector LATAM Corporates 1Q17 Earnings Review-Deutsche Bank

Deutsche Bank Markets Research Emerging Markets Corporate Credit HY Multi Sector IG Multi Sector Date 21 July 2017 LATAM Corporates 1Q17 Earnings Review ________________________________________________________________________________________________________________ Deutsche Bank Securities Inc. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017. Eduardo Vieira Research Analyst (+1) 212 250-7568 eduardo.vieira@db.com Xavier Olave Research Analyst (+1) 212 250-6135 xavier.olave@db.com In this report, we present our review of 1Q17 earnings for roughly 100 LatAm corporate and financial issuers, including one-pagers with individual earnings tables, result analysis and management guidance, as well as sector and country aggregations, and our observations/views of recent and future earnings trends. Corporate leverage in Latin America was mostly flat in 1Q17 vs. 4Q16 on a simple average basis but lower than the peak in 1H16, with mixed performance by sectors and macro dynamics, while liquidity cushions remained mostly comfortable; we expect a moderate improvement in leverage in 2Q17 We have looked at 1Q17 earnings of over 80 LatAm non-distressed corporate (non-financial) issuers and found that, on average, corporate leverage in the region has stayed mostly flat on a quarterly sequential basis, at ~3.4x net debt to LTM EBITDA, but declined from the multi-year peak levels observed in 1H16, as the positive impact of higher oil and mining product prices (net of FX) on energy and mining & steel companies was offset by 1) FX weakness in Argentina and Mexico impacting local-currency plays operating in these countries; 2) FX strength in Brazil impacting pulp and meat export margins; 3) chicken overcapacity, low cattle availability and export disruptions from corruption investigations also impacting Brazilian meatpackers; 4) soft consumer demand in the region impacting retailers; 5) weather disruptions in Peru; 6) recession and cement overcapacity in Brazil impacting cement producers and airlines with material operations in the country; and 7) seasonal working capital uses putting temporary pressure on net debt figures. It is also worth noting the positive performance of the following issuers: Eletrobras (Brazil utilities), which benefited from FX strength, price increases above inflation, asset sales and compensation from the government; TGS (Argentina utilities), due to an improved tariff scheme; and Braskem (Brazil petrochemicals), which was aided by strong PVC spreads, stronger demand in Brazil and the full ramp-up of its Mexican plants. It was again encouraging to observe that the vast majority of credits in our sample have comfortable cushions in terms of recurring cash flow after fixed charges and sustaining capex, as well as 12-month liquidity prospects. A filter of HY non-SOE issuers with net leverage above 4.0x and 12-month liquidity ratio (measured by [Cash & Equivalents + EBITDA] / [Short-term Debt + Interest Expe