Thursday, 21 September 2023
WorldThis is how the investment funds that fuel inflation are funded: 3,000...

This is how the investment funds that fuel inflation are funded: 3,000 million in one year

What cost six euros two years ago now costs seven after having accumulated in that period an interannual inflation of 16.6% caused, basically, by a cascade of business decisions aimed at maintaining and expanding margins to avoid the decrease in profits due to the increase in production costs.

This inflationary process is having as its main beneficiaries a series of investment funds and international investors, some of them representatives of other States, who, after shooting up the prices of the large companies of which they are shareholders, are obtaining multimillion-dollar benefits from this extraction of household income through the simple procedure of distributing dividends, which this year will be around 3,000 million euros.

Variation of sales prices in relation to that of unit production costs between 2021 and 2022. Bank of Spain

Inflation has been subsiding for a few months, as it happened again in August, although, no matter how different the appearance may be, it is not a drop in prices but rather a chain of increases of lesser magnitude than those of a few months ago. and that comes after having consolidated an increase in the cost of living of unknown magnitude in the last thirty years.

This process of rising prices, which has coincided for the most part with a period of wage freezes that has undermined the purchasing power of some households that have been forced to draw on savings and go into debt with consumer loans, has as its main victims economic agents. such as families and SMEs and some companies as major beneficiaries, to a greater extent the larger their size, as the Tax Agency had been detecting in its collection reports.

A recent study by the Bank of Spain has identified the sectors that have increased inflation the most by raising the sale price of their products and services in a proportion that is clearly higher than the increase in their costs; that is to say, to the foci that have applied the greatest intensity to this route of rent extraction under the lee of the war in Ukraine, the blockage of the supply chain and other events of a speculative nature.

They would be, in this order, the electricity and gas companies, which last year applied price increases of almost 45% to their clients when the cost of their productive factors did not reach 30%; those of refining, with 34% to 25%; hospitality and restaurants, with almost 10% to 6%, transportation, which raised its rates almost 5% when its costs experienced a drop of 3%, and, to a lesser extent, construction (7% to 6% %) and wholesale trade (13% by 10%).

To these, and in addition to the effects that the rise in housing and credit prices are having on family economies without officially being counted in the CPI, we must add the food sector, in which half a dozen manufacturing companies super and hyper They control three quarters of the market and whose retail prices have risen 27.8% since the beginning of 2021, almost double what the CPI has increased in that period (15.3%), according to the data of the INE.

The main companies in this last sector, as occurs in those identified by the Bank of Spain as inflationary, also have strong participations of foreign investors, when they are not directly local subsidiaries of international groups, which replicates the same process of extraction of income to maintain margins, distribution of profits via dividend and subsequent transfer of those resources to where investors consider appropriate.

These sectors will distribute around 3,000 million euros among their foreign investors as interim dividends against 2022 profits, with the bulk concentrated in the energy sector, which will distribute 2,585 million among them with the Italian public company Enel (1,174). and the American fund BlackRock (357) as the main beneficiaries.

To that figure will be added the part that will finally be distributed as a dividend of the almost 1,200 million euros of accumulated profits in the food (604), transportation (187) and hotels (390) sectors, all of them. with a powerful presence of financial shareholders, although to a lesser extent in the latter due to the economic ailments it has been suffering since the pandemic.

“Sales prices grew more than their unit costs”

“It was already known that the rise in inflation was not being caused by the war in Ukraine, because it began the previous year, but by the rise in business margins to, at a time of stagnation in consumption, sustain the theses of profit and maintain the growth logic of large companies,” explains Pedro Ramiro, coordinator of OMAL (Latin American Multinational Observatory).

This is not something new or exclusive to Spain, Ramiro notes, although it is “where this mechanism has been most reflected” and has been activated in “a good part of the main sectors of capitalism.” “It is not that the need for companies to increase profits to benefit shareholders arose in Spain with the entry of investment funds into large companies, accelerated from 2008, but rather that the role of the funds has been more well to exacerbate this tendency”, adds the coordinator of OMAL.

“The wheel was already in motion, but with the entry of funds, which in turn are chained to other financial agents who impose the need to guarantee high returns in the short term, and with the blocking of other avenues such as public aid , that wheel spins faster,” Ramiro concludes.

For its part, the Bank of Spain study highlights how “sales prices grew more than their unit costs” in the sectors of electricity, gas and the refining of petroleum products both for the period 2019-2022 and for the 2021-2022, something that also happened, “although in a more moderate way”, with the transportation and storage and hospitality branches in the second of those stages.
These are the main shareholders of the largest Spanish companies in each of these branches and the money they are going to pocket via dividends:

Energy: 2,585 million in dividends for investors

The electricity and gas sector is the one that, with the permission of a bank whose prices do not enter into the CPI calculations, is generating greater returns for investors, so much as to have reached 2,585 million euros in interim dividends. the benefits of last year, in which its profits reached a rate of 54 million net per day.

The extreme situations occur between Endesa, where the Italian public company Enel will take 1,174 million as the owner of 70% of the shares when the dividend amounts to 1,678 (after a profit of 2,541), and Cepsa, whose ownership is shared by the sovereign wealth fund. of Abu Dhabi Mudabala and the British Carlyle Group by 63% and 37%, and that is not going to distribute money after closing 2022 with accounting losses.

Naturgy is the second company that gives foreign investors the most money to earn, with 757.3 million euros (58.26% of a dividend of 1,300 after a net profit of 4,339) that will be distributed by CVC funds (20.41% ), GIM (20%) and IFM (14%) and the Algerian state company Sonatrach (3.85%).

The above energy companies are, of the seven main ones, the only ones in which the American fund Blackrock is not present, which owns 5.395% of the shares of Iberdrola, 5.475% of those of Repsol, 5.9995% of those of Red Eléctrica and 5.565% of those of Enagás that will bring a total of 357 million euros.

The list of beneficiaries is completed by a series of sovereign investors (State representatives) such as the Bank of Norway or Norges Bank, with 218 million from Iberdrola and Repsol; Qatar Investment Authority, with 274 in Iberdrola, and Mubadala, with 14 in Enagás, and financiers such as the US Millennium and Bank of America, with, respectively, 25 in Repsol and 16 in Enagás.

Without forgetting, of course, that the Spanish State itself shares shares with some of these global investors decades after having privatized the old public companies, a situation that this year will bring it 105 million from the Eléctrica network, of which it retains 20 %, and 22.5 from Enagás, of which it maintains 5%.

Food: funds and subsidiaries control the bulk of the sector

Four of the main food distribution chains operating in Spain, Lidl, Alcampo, Aldi and Carrefour, are subsidiaries of groups from other community countries and one more, DIA, is 77% controlled by the Luxembourg fund Letterone Investment, which controls the Russian magnate Mijail Fridman, while only two chains, Mercadona and Eroski, have a Spanish majority in their capital.

However, these last two occupy just over 30% of the market compared to 26% for the other five, according to estimates by several consulting firms, while the rest is in the hands of local chains.

Mercadona, leader in the sector with a market share of 26% and owned by the Roig family, will distribute 161 million as a dividend this year after closing 2022 with profits of 718, while Eroski, which operates as a cooperative, generated profits of 64 million that must be reinvested.

The rest, with the obvious exception of DIA, whose accounts showed losses of 124 million last year in the midst of the restructuring process, have not made public their decisions on the distribution of profits, which reach 289 million in the case of Carrefour, the 192 in Lidl and the 113 in Alcampo.

Aldi, in full expansion, earned another 10, giving a total of 604 million whose fate will be decided by its headquarters in France and Germany.

Multinationals enter the transport business

Nor in the case of transport is it known the destination of the profits that the main players in the sector accumulated last year, and which stood at 130 million euros for the Alsa bus company, 100% owned by the British National Express, and 57 for Primafrío, one of the leaders in merchandise and where the Conesa brothers maintain 51% of the shares after having given entry to the American fund Apollo with the remaining 49% in 2022.

Ontime, the Spanish giant in the sector controlled by the local fund Alantra and in which Acotral, ENvialia and Capitrans coexist, among other companies, maintained its turnover at around one billion euros, while that of Avanza, in the hands of Mexican Grupo Ado (Mobility Ado, currently), ranked in the top 500 based on municipal contracts and local lines.

Hospitality giants continue to recover from the pandemic

The Spanish hotel sector, whose main groups remain in local hands, has, like each of the previous ones, its own profiles, among which a notable increase in prices that coincides with a recovery in demand, especially foreign demand, stands out. with which it begins to wipe off the losses it recorded during the pandemic.

Everything indicates that none of the four main chains will distribute dividends this year, in the case of Meliá and Barceló, after respective profits of 120 and 170 million euros in 2022.

NH, the only one of the four controlled by a foreign parent company, in this case the Thai Minor Internacional, which owns 95.9% of the shares, accumulated another one hundred million profits with which it plans to repay part of its ICO credits, while Riu focuses its management on cleaning up the 1.4 billion debt it carries, almost half of it (575) generated during the pandemic.

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