August 2, 2018 / 8:50 PM / 2 months ago

UPDATE 1-Brazil sugar, ethanol firms seen cutting investments, borrowing -Itau BBA

(Recasts to add details from banker’s comments)

SAO PAULO, Aug 2 (Reuters) - Brazilian sugar and ethanol companies are unlikely to increase their debt level in coming months, a banker said on Thursday, as a tough operating environment this harvest will decrease their appetite for investments and risk.

Pedro Fernandes, head of agribusiness at investment bank Itaú BBA, said during a presentation for journalists that sugar and ethanol companies represent the most important part of Itau Unibanco’s agribusiness loan book, declining to elaborate.

Yet this season, he predicts the loan portfolio for the sugar and ethanol sector will not grow as firms are less keen to access capital. This is in contrast with the remainder of Brazil’s farm and agribusiness industry, which will likely seek more loans, the banker said.

In the season that ended last March, Brazilian sugar and ethanol producers reduced debt levels by 3 reais ($0.7990) per tonne as producers managed to generate cash and pay down debt, Fernandes said.

This year the outlook is uncertain as, according to analysts, sugarcane crushing in the center-south of Brazil, the world’s largest cane belt, is expected to fall to its lowest in four harvests due to aging fields and dry weather.

“We believe the balance of debt owed by sugar and ethanol companies will not rise because investments will be reduced,” Fernandes said.

Itaú Unibanco’s total loan book for the farm sector, including farmers and processors of grains and meats, was 30 billion reais ($7.99 billion) at the end of last year, he said.

While the loan portfolio for the overall agribusiness sector is bound to grow, the book for sugar and ethanol companies will remain stable, Fernandes said. ($1 = 3.7549 reais) (Reporting by Ana Mano; Editing by Jonathan Oatis and Sandra Maler)

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