Carrefour may bump banks in Brazil in favour of retail investors

[SAO PAULO] Carrefour SA may circumvent Brazil's bankers in favour of mom-and-pop investors when it returns to markets next year.

The grocer's Brazilian unit, Atacadao Distribuicao Comercio e Industria Ltda, is considering issuing local bonds for retail investors as it explores alternatives to a "concentrated banking system" and the high fees the banks charge, chief financial officer Sebastien Durchon said in an interview at Bloomberg's Sao Paulo office.

The firm has no debt maturing this year after it issued 1.5 billion reais (S$550.03 million) in local bonds and its bank unit issued 700 million reais in bank bonds, Mr Durchon said. Carrefour Brazil cut its debt in half, and reduced financial costs by 74 per cent since its initial public equity offering last year.

"Our strategic policy was to make a big refinancing in the beginning of the year, taking advantage of the low interest rates, to avoid the volatility in the second half," Mr Durchon said.

The company went public July 19, 2017, and shares are down about 15 per cent since peaking Sept 21.

Revenue from sales at supermarkets and hypermarkets rose 1.5 per cent in the 12 months through June, about one-quarter the level from a year earlier, according to the national statistics institute. Still, Carrefour is optimistic.

"Our results in Brazil are good, we have cash, and a good growth pace," chief executive officer Noel Frederic Georges Prioux said in the same interview.

Carrefour net sales are up 5.3 per cent in the first six months of the year, indicating the group gained market share. It controls about 15 per cent of the total Brazil grocery market, he said. The Brazilian unit already represents more than half of the group's operational results and hasn't suffered a cut in investments as part of the holding's initiative to control costs worldwide, Mr Prioux said.

One thing is certain: Carrefour Brazil, like its peers, is unlikely to escape the current scenario completely unscathed, no matter how cautious it is. The company doesn't hedge its results because costs are too high - as a consequence, Brazil-derived profit shrinks on the French holding's balance sheet every time the local currency loses value. So far this year, the real has weakened 10 per cent against the euro, the largest drop among major currencies.

"The exchange rate is the most difficult thing for us," Mr Prioux said.

BLOOMBERG