SAO PAULO--Comgas, as natural-gas distributor Cia. de Gas de Sao
Paulo (CGAS5.BR) is known, said Wednesday it expects volumes sold
to industry to rebound with the broader economy next year after
posting the first decline since the 2008 crisis.
Natural-gas volumes sold to industries are expected to end 2012
about 2% below 2011 volumes as Brazil struggles with declining
global demand, Chief Financial Officer Roberto Lage told reporters.
The petrochemical industry has been especially hard hit as cost of
production in Brazil climbs, leading companies to shift production
to other countries, he said.
Except for a downturn in volume during the 2008 crisis, "this
will be the first time in 12 years that industrial volume sees a
retraction," he said. "For 2013 our expectations are very much that
there will be a marginal improvement in industrial output,
accompanying GDP growth."
Economists expect Brazil's economy to grow 4% next year, after
ending 2012 with an expansion of just 1.5%. Industrial output,
meanwhile, is expected to expand 4.2%, after shrinking 2.1% this
year, according to the weekly central bank survey of economists
published Monday.
While volumes to industrial clients improved in the third
quarter from the second quarter, that is a seasonal expansion that
happens every year, according to Comgas executives.
"There hasn't been a real recovery in demand," said Sergio Luiz
da Silva, head of planning and supply. "Everyone is going through
difficult times."
The company's strategy of focusing on residential clients has
paid off, with 90,000 new households added to the company's
customer list since the start of this year, or growth of 10% on the
year, Mr. Lage said. Residential clients still account for a small
share of volume--just 3.9% of volume is sold to residential
clients, compared with 75% for industrial clients--but Comgas
expects to keep growing residential client base at double-digits
every year in the medium term. That is because residential clients
provide attractive margins for the company: despite the small
volume of sales, residential customers provide one-fourth of
Comgas's operating margins.
Comgas passes on higher prices to consumers, but recent spikes
in prices have eaten into the company's cash position because it
must foot the higher bill until it can pass on the costs during
annual rate adjustments that happen every May, Mr. Lage said. To
help remedy that problem as the company goes forward with
investment of more than BRL400 million a year, Comgas has
contracted BRL1.1 billion in loans from national development bank
BNDES.
Mr. Lage said Comgas, control of which will be passed to Brazil
sugar and ethanol producers Cosan SA (CSAN3.BR) from BG Group
(BG.LN), also plans to raise more than BRL500 million before 2014
through multilateral bank loans, debt sales, or even the issue of
infrastructure bonds, on which investors are exempt from paying
taxes.
Write to Paulo Winterstein at paulo.winterstein@dowjones.com
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