Marcopolo Eyes Africa and Middle East to Increase Exports by 50%

ACCRA (Capital Markets in Africa) – Bus maker Marcopolo SA is using Brazil’s rough roads as a calling card to enter markets as remote as Ghana and Cameron as it tries to shield its business from a recession at home.

The company started exporting to 12 new countries in the past year and now ships to 40 markets worldwide, according to Ricardo Portolan, the exports manager at the Caxias do Sul-based company. That helped put it on track to boosting export revenue in dollar terms by 50 percent in 2016, he said.

As Brazil muddles through its worst recession in at least a century, Marcopolo refocused its efforts on offshore markets to compensate for the sharp drop in domestic sales. Bus sales tumbled 29 percent to 12,000 units in 2016, according to data released Thursday by the National Vehicle Manufacturers Association, known as Anfavea. The figure sets the market back a decade and compares to a peak of 35,000 in 2011, when Brazil’s economy was booming.

“Exports were a positive surprise for Marcopolo,’’ Credit Suisse analyst Felipe Vinagre said in an interview. “The company proved it has an international product.”

Still, analysts remain negative on the stock, which has one of the worst consensus ratings among Brazil small caps, according to data compiled by Bloomberg. Among analysts who rate the stock, there are six hold recommendations and nine sells — including one from Vinagre, who keeps a negative view because of uncertainty about Brazil’s economic recovery.

Economists are becoming less optimistic about President Michel Temer’s ability to revive the growth and have trimmed forecasts for a much-awaited rebound. Activity is expected grow 0.8 percent in 2017, after tumbling an estimated 3.5 percent in 2016, and 3.8 percent in the previous year.

Marcopolo is also cautious about the economy and expects the domestic market to start recovering only on the second half of 2017, Portolan said. Anfavea sees a 12 percent increase in sales to 13,400 buses for 2017 — still below the 2005 level — as newly elected mayors start renovating their municipal fleets.

Marcopolo buses, which are designed with structural reinforcement such as extra resistant suspension systems to cope with Brazil’s rutted and often unpaved roads, are well suited for markets facing similar challenges related to a lack of infrastructure.

The buses’ features coupled with the Brazilian currency’s devaluation this decade helped the company become more competitive abroad, Credit Suisse’s Vinagre said.

“It could be harder for it to sell in the European market, which requires higher sophistication, but in markets similar to Brazil, it has good cost and quality,” he said.

The company started trading its double-decker bus in Cameron last month and, while volumes are still low, Marcopolo is betting it will grow in the longer term. Neighboring Argentina is also a key part of the company’s strategy, Portolan said. Marcopolo owns two factories locally through joint ventures.

“Until the end of 2015, the possibility to export from Brazil to Argentina was virtually zero, as licenses were totally blocked,’’ he said. “The local market has a repressed demand from recent years.’


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